[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
ECONOMIC STIMULUS PAYMENTS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JUNE 19, 2008
__________
Serial No. 110-88
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California JIM MCCRERY, Louisiana
SER M. LEVIN, Michigan WALLY HERGER, California
JIM MCDERMOTT, Washington DAVE CAMP, Michigan
JOHN LEWIS, Georgia JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee JERRY WELLER, Illinois
XAVIER BECERRA, California KENNY HULSHOF, Missouri
LLOYD DOGGETT, Texas RON LEWIS, Kentucky
EARL POMEROY, North Dakota KEVIN BRADY, Texas
MIKE THOMPSON, California THOMAS M. REYNOLDS, New York
JOHN B. LARSON, Connecticut PAUL RYAN, Wisconsin
RAHM EMANUEL, Illinois ERIC CANTOR, Virginia
EARL BLUMENAUER, Oregon JOHN LINDER, Georgia
RON KIND, Wisconsin DEVIN NUNES, California
BILL PASCRELL, JR., New Jersey PAT TIBERI, Ohio
SHELLEY BERKLEY, Nevada JON PORTER, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
Janice Mays, Chief Counsel Staff Director
Jon Traub, Minority Staff Director
______
SUBCOMMITTEE ON OVERSIGHT
JOHN LEWIS, Georgia, Chairman
JOHN S. TANNER, Tennessee JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts ERIC CANTOR, Virginia
XAVIER BECERRA, California JOHN LINDER, Georgia
RON KIND, Wisconsin DEVIN NUNES, California
BILL PASCRELL, JR., New Jersey PAT TIBERI, Ohio
JOSEPH CROWLEY, New York
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
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C O N T E N T S
__________
Page
Advisory of June 10, 2008, announcing the hearing................ 2
WITNESSES
Nina E. Olson, National Taxpayer Advocate, Internal Revenue
Service........................................................ 7
Hon. Douglas H. Shulman, Commissioner of the Internal Revenue
Service........................................................ 50
Linda McMahon, Social Security Administration Deputy Commissioner
for Operations................................................. 62
SUBMISSIONS FOR THE RECORD
AARP, statement.................................................. 80
Morrison Affairs Public Group, statement......................... 89
National Council on Aging, Statement............................. 91
Paul Donnelly, Statement......................................... 92
Santa Barbara Bank & Trust, Statement............................ 93
Hon. J. Russell George, Statement................................ 96
ECONOMIC STIMULUS PAYMENTS
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THURSDAY, JUNE 19, 2008
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Oversight
Washington, DC.
The Subcommittees met, pursuant to notice, at 10:04 a.m.,
in room 1100, Longworth House Office Building, Hon. John Lewis
[Chairman of the Subcommittee on Oversight] presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON OVERSIGHT
CONTACT: (202) 225-5522
FOR IMMEDIATE RELEASE
June 10, 2008
OV-9
Lewis and McNulty Announce a Joint Hearing on Economic Stimulus
Payments
House Ways and Means Oversight Subcommittee Chairman John Lewis (D-
GA) and Social Security Subcommittee Chairman Michael R. McNulty (D-NY)
today announced that the Subcommittees will hold a joint hearing on the
status of the economic stimulus payments. The hearing will take place
on Thursday, June 19, 2008, at 10:00 a.m., in the main Committee
hearing room, 1100 Longworth House Office Building.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.
BACKGROUND:
On February 7, 2008, the Congress passed the ``Economic Stimulus
Act of 2008,'' which was signed into law by the President on February
13, 2008 (P.L. 110-185). This law provides lower-income and middle-
income working families, and certain seniors and disabled veterans,
with an economic stimulus payment (commonly referred to as a ``rebate
check'').
The rebate check generally is equal to the lesser of a taxpayer's
net income tax liability or $600 ($1,200 in the case of married couples
filing a joint return). In the case of taxpayers with qualifying income
(defined as earned income, Social Security benefits, disabled veteran
benefits, and benefits for widows of disabled veterans) of at least
$3,000 and taxpayers with positive income tax liability, the rebate
check will not be less than $300 ($600 in the case of married couples
filing a joint return). The amount of the rebate check is increased by
$300 for each child under the age of 17. The rebate check phases out
for high-income taxpayers.
To receive a rebate check this year, eligible taxpayers must file
an income tax return for the 2007 tax year by October 15, 2008. There
are special filing requirements for taxpayers who normally are not
required to file an income tax return (``ESP filers''). The Internal
Revenue Service (``IRS'') estimates that 130 million economic stimulus
payments will be sent to eligible taxpayers, including ESP filers. For
returns filed by April 15th, economic stimulus payments that were
direct deposited have been completed, and, by July 11th, the remaining
checks are scheduled to be mailed. Through June 5, 2008, about 67
million economic stimulus payments have been made.
To administer the rebate checks, the IRS and the Social Security
Administration (``SSA'') received an additional appropriation of $50.7
million and $31 million, respectively, to ensure that the rebate checks
are fully and properly paid. These funds have been used, in part, to
educate, assist, and locate taxpayers eligible for the rebate checks.
While the IRS and SSA reach out to taxpayers and beneficiaries to
increase public awareness, they also must protect taxpayers from
identity thieves who use fraudulent schemes and tax scams involving the
rebate checks to obtain personal and financial information and claim
someone else's rebate check. The Federal Trade Commission and the
Internet Crime Complaint Center (``IC3'') report an increasing number
of identity theft complaints referencing the economic stimulus
payments. The IRS has issued warnings to taxpayers about rebate check
scams and expects these scams to continue.
``Time is running out for millions of elderly and working Americans
to file tax returns and receive a rebate check this year,'' said
Oversight Subcommittee Chairman Lewis. ``Some problems have developed
with the rebate checks, and it is preventing relief from getting to
people who are struggling to keep up with rising costs. We must work
quickly to address these problems and help ensure that the rebate
checks reach everyone who is eligible.''
Social Security Subcommittee Chairman McNulty said, ``Economic
stimulus rebates must be delivered quickly and accurately to achieve
their purpose of stimulating the economy. Earlier this year, Congress
asked the Social Security Administration to help reach seniors and
other beneficiaries who do not usually file tax forms so they could
receive a check if eligible. We provided SSA with additional resources
to perform this duty and this hearing presents an opportunity to
determine whether SSA's and IRS's efforts were successful.''
FOCUS OF THE HEARING:
The Subcommittees will review the status of the economic stimulus
payments. They will examine the number of returns received and
processed, the number of rebate checks issued (direct deposit and
paper), the amount of the rebate checks issued, the overall payment
schedule of rebate checks, and outreach activities conducted by the IRS
and the SSA to locate individuals eligible for the rebate checks.
Further, the Subcommittees will examine problems experienced by
individuals eligible for rebate checks and what can be done to address
these problems.
The Subcommittees also will examine the identity theft schemes
developed to date and review actions taken in response. Finally, the
Subcommittees will ask the agencies to examine how to protect Social
Security beneficiaries and other individuals from identity theft
schemes using rebate checks as a lure.
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Chairman LEWIS. Good morning, good morning. The hearing is
now called to order. Today the Ways and Means Subcommittees on
Oversight and Social Security will review the status of the
rebate checks.
People are suffering. I am really not sure how people are
getting by. We are trying to get money into the hands of people
who need it the most. But during that, we have placed a huge
strain on the resources of the IRS. We have not been successful
at reaching all of the people who are entitled to this tax
rebate.
As Chairman of the Subcommittee on Oversight, I know that
it has been hard for the Internal Revenue Service to take on
the rebate checks during the tax filing season. There are
almost 20 million additional taxpayers. Calls to the IRS have
doubled this filing season, with over 10 million calls in 1
week, and 70 million calls to date. The Service has mailed over
200 million notices to taxpayers on the rebate checks, alone.
I am concerned that the strain on its workers, its budget,
collection, and taxpayer services will be felt for the next
filing season. The Administration needs to tell the Congress
what resources the IRS needs. In addition to the burden on the
IRS, we know that millions of elderly and working people have
not yet filed for a rebate check. People suffering under the
pressure of rising food and gas prices, we know people need
this relief, and they need it now.
Clearly, millions of people do not know that they are
eligible. We look forward to learning how--the Agency's plan to
reach these people. We want to know, learn how the Congress,
the Administration, and the public, and the private sector can
work together to put billions of dollars in the pockets of
Americans who need it most.
Now I am pleased to recognize the distinguished Ranking
Member of the Subcommittee on Oversight, my dear friend Mr.
Ramstad, for his opening statement.
Mr. RAMSTAD. Thank you, Mr. Chairman, and you are a dear
friend. I appreciate your yielding, and I thank both you and
Chairman McNulty for holding this hearing today.
The Economic Stimulus Act that we passed in February is an
example of how both parties and Congress and the White House
can work together in a bipartisan, pragmatic, and common-sense
way when urgent action is needed. There is already some
evidence that the stimulus has helped the economy. Although the
checks didn't go out until the end of April, retail spending
has already increased significantly; more than 76 million
payments, totaling $64 trillion have already been sent, with
more to come.
However, none of this--I think that's $64 billion, it
should read; sorry, I still love my staff--most people probably
don't fully realize the unanticipated additional workload that
this created for the IRS. I think all of us owe the Service a
debt of gratitude.
Certainly, the Service faced many challenges, other than
getting the stimulus checks out. During this previous--this
recently completed--filing season, there was the late passage
of the AMT patch that required, I know, reprogramming the
systems and printing new forms. I know a lot of IRS employees,
and I know a lot of them worked overtime to minimize the
disruption that late enactment of the AMT caused. So, blame
Congress, not the IRS, for that one.
But once the filing season started, the IRS began
processing the 2007 returns, we asked the IRS, really, to
perform double duty to expedite our stimulus plan. I think the
Service responded very, very well.
Also, I know the--part of the staff was diverted from
reading the newspapers, from collections enforcement. There
will be a price to pay in terms of foregone revenue, I guess,
to the tune of $565 million, according to IRS estimates. I am
looking forward to hearing more of that today from the
testimony.
So, I hope we can learn in this hearing if the Service has
sufficient resources for taxpayer services, because obviously
that's important. I am glad to see Ms. Olson here, the taxpayer
advocate who does such a great job on behalf of taxpayers.
We want taxpayers to have the best service possible, but we
don't want to sacrifice other primary IRS responsibilities, as
well. So, I also hope this hearing will shed light on what can
be done to prevent scam artists from preying on taxpayers,
especially the elderly. I am very concerned about that. We have
seen ruses from scam artists that have victimized many, many
people, again, especially elderly, surrounding previous
stimulus payments. I hope that's avoided as much as possible
this time around.
So, I look forward to the testimony today, Mr. Chairman,
about the administration of stimulus payments. It's a very
massive job, it's a very important job, and it's good to know
the IRS has many dedicated public servants that were able to
perform under pressure.
So, thank you again, Mr. Chairman, for holding this
hearing. I yield back.
Chairman LEWIS. Thank you, Mr. Ramstad. Now I am pleased to
recognize the Chairman of the Subcommittee on Social Security,
Mr. McNulty, for his opening statement.
Mr. MCNULTY. Thank you, Chairman LEWIS. Thank you for your
22 years of outstanding service in the U.S. Congress, and for
your decades of leadership in the civil rights movement, having
put your life on the line on numerous occasions to provide
civil rights and equal rights for all Americans.
I am grateful to you for organizing today's joint hearing
on the implementation of the Economic Stimulus Act of 2008. The
impetus for this legislation was the downturn in the economy,
which continues to lag. In order to work, the stimulus had to
be delivered quickly.
Of course, some things are much easier said than done. But
I have been impressed by the rapid response of the agencies
tasked with the job of getting payments out as quickly and as
effectively as possible. A mere 55 working days passed between
the time that the President signed the legislation and the
first stimulus payment was delivered. This was during the busy
tax filing season.
The Social Security Administration assisted by providing
information to IRS, so it could reach out to Social Security
and Veterans Administration beneficiaries who did not normally
need to file, but would have to do so in order to qualify for
their payment. These individuals received detailed materials
from the IRS on the steps they needed to take in order to
receive the stimulus payment. These processes are much more
complicated than they appear on the surface, and the agencies
have much to be proud of in the work they have done so far.
Inevitably, the stimulus program caused individuals to
contact IRS and SSA with questions, and to seek help with
filing the proper paperwork. IRS received the bulk of the
inquiries. SSA also saw an increase in contacts.
In accord with congressional intent, and the Agency's
primary role as the administrator of the Social Security
system, SSA directed these individuals to the IRS for more
information. The private sector and non-governmental
organizations are also doing their part to help, as businesses,
senior citizens groups, and others have assisted with publicity
and tax filing for the stimulus.
Today, I hope to learn more about how successful these
efforts have been. I understand that there may be a significant
number of seniors and veterans who are eligible for a stimulus
payment, but have yet to file the necessary tax returns in
order to receive it. There are some concerns about whether
there has been a sufficient outreach to this population, and I
expect to gain a better understanding of how this might be
done.
I would hope and expect that any proposals for additional
outreach would not draw SSA staff away from their principal
duties administering Social Security, or generate new workloads
for the Agency. Commissioner Astrue and I spoke last Friday,
and I know he shares these concerns.
As we consider the options, I will advise my colleagues
that we should remain ever mindful that SSA is already
struggling to meet its current workloads, given a decade of
under-funding, and an unprecedented backlog of unprocessed
disability claims, and an impending spike of retirement claims
from the baby boom generation. I expect that timely payment of
Social Security benefits for seniors, people with disabilities,
and survivors also would be of great benefit to the economy. I
look forward to the testimony, and once again, thank the
Chairman and the Ranking Members.
Chairman LEWIS. Thank you, Mr. McNulty for your statement.
You didn't have to say it, but thank you.
Now I am pleased to recognize the Ranking Member of the
Subcommittee on Social Security, Mr. Johnson, for his opening
statement.
Mr. JOHNSON. Thank you, Mr. Chairman. Chairmen Lewis and
McNulty both, I want to thank you for holding this hearing
today. McNulty has spoken very eloquently about the shortfalls
in the Social Security Administration, and how we keep putting
extra loads on them all the time without funding.
But in order to give a needed boost to our National
economy, the Congress passed, the President signed into law
legislation estimated to provide more than 100 billion to 130
million people--and that number is right, by the way.
It's important that the Congress know whether this massive
undertaking by the Internal Revenue Service will help--with
help from the Social Security Administration is being done
right.
Congress gave the agencies almost $300 million to cover the
cost of processing the rebate checks. We need to know whether
this money was spent wisely or not. Included in the cost of
administering the stimulus program was education and outreach
to those eligible, including those receiving Social Security
benefits.
I look forward to hearing the testimony today by the Social
Security Administration, as they discuss their work with the
IRS in targeting and reaching these beneficiaries. All signs
suggest that the IRS and Social Security have performed very
well in carrying out this massive and difficult task, while
under immense pressure. Both agencies and their staffs are to
be commended for their professionalism and dedication to
getting the job done right.
Letting Americans keep more of their own money is always a
good thing. During tight economic times and high gas prices,
it's even more important. I thank the witnesses for their
upcoming testimony, and I thank you again, Chairman Lewis and
Chairman McNulty, for holding this important hearing.
Chairman LEWIS. Thank you very much, Mr. Johnson, for your
statement. Now we will hear from witnesses. I ask that you
limit your testimony to 5 minutes. Without objection, your
entire statement will be included in the record.
It is now my pleasure to introduce the national taxpayer
advocate, Nina Olson.
STATEMENT OF NINA E. OLSON, NATIONAL TAXPAYER ADVOCATE,
INTERNAL REVENUE SERVICE
Ms. OLSON. Thank you, Mr. Chairman, Ranking Members, and
distinguished Members of the Subcommittees. Thank you for
inviting me to testify today regarding the status of economic
stimulus payments. I would like to make five main points from
my perspective as the national taxpayer advocate, the statutory
voice for taxpayers and taxpayer rights.
First, I would like to acknowledge the extraordinary job
the IRS has done in delivering these stimulus payments. The
Economic Stimulus Act was signed into law on February 13th, 4
weeks after the filing season began, and while the IRS was
still grappling with programming changes occasioned by numerous
tax law changes enacted in December.
The delivery of stimulus payments was a massive
undertaking, in some ways akin to running a second filing
season. The IRS has managed both to deliver a successful filing
season, and to develop and implement plans to make stimulus
payments to an estimated 130 million taxpayers in a remarkably
short period of time.
Second, in light of its limited resources, the IRS was not
able to staff its telephone lines adequately, and had to make
certain tradeoffs. The IRS has received 135 million telephone
calls so far this year, more than twice the number of calls it
received at this point in 2007. Not surprisingly, the level of
service on the toll free lines overall has dropped from 80.6
percent in 2007 to 62.8 percent this year, and to 42.9 percent
during the recent week ending June 7th.
The level of service on the telephone line dedicated to
answering questions about stimulus payments has been even
lower; 47.7 percent this year and 30.4 percent during the week
ending June 7th. Only 1 out of every 10 callers to the stimulus
line has spoken to a live human being. The IRS, understandably,
transferred some employees from its accounts management and
automated collection system functions to help in answering the
onslaught of telephone calls. But, as a result, the inventory
of individual taxpayer correspondence relating to account
adjustments has more than doubled.
These declines in the level of service are not mere
statistics. They have a real negative impact on taxpayers,
increasing their compliance burden. For example, a taxpayer who
cannot get through to the IRS to negotiate an installment
agreement may instead find his paycheck levied unnecessarily. A
taxpayer whose audit document submissions are not properly
processed may end up petitioning the tax court at significantly
greater taxpayer and government expense.
Third, a few glitches in taxpayer frustrations have arisen.
One glitch was the Social Security numbers of approximately
1,500 taxpayers were inadvertently disclosed when the IRS
routed stimulus payments to the wrong bank accounts.
Although not caused by IRS error, one source of frustration
was that more than 20 million taxpayers who purchased refund
anticipation loans, or refund anticipation checks, found that
they were ineligible to receive their stimulus payments quickly
via direct deposit, and instead were required to wait up to
two-and-a-half months longer to receive paper checks.
Local taxpayer advocates report taxpayer frustration in
their not being able to obtain expedited stimulus payments, or
overrides of tax offsets in economic hardship situations.
Fourth, the IRS and taxpayer advocate service are
conducting considerable outreach to senior citizens and other
taxpayers without a 2006 tax filing requirement to encourage
them to file forms 1040A to claim their stimulus payments. But
there are significant barriers that will result in
substantially less than full participation by this target
population.
In addition to the fundamental complexity of the program,
challenges include: the fact that some of these individuals may
view filing a return as requiring too much effort for $300;
that this population may lack Internet access of skills; or it
may lack the mobility necessary to obtain assistance in
applying for the ESP. Members of this population may be
incapacitated, and under the care of guardians, conservators,
nursing homes, and hospitals. Individuals who have not had
contact with the IRS for years may be unwilling to open that
conversation again.
Fifth, there are several long-term lessons that can be
learned from this experience. The complexity of the ESP
eligibility and computation rules has created taxpayer
confusion, and caused unnecessary work for the IRS. If Congress
decides to enact another ESP, it should consider how to
simplify the eligibility rules so that they lend themselves to
easy communication. Such simplification may mean that some
individuals receive more or less than they might under the
current ESP, but that tradeoff in clarity will be well worth
it.
Another lesson is that when an initiative targets a
population that does not otherwise have contact with the IRS,
it may be better to utilize another Federal agency for payment
delivery. Why not find a way to let SSA and the VA make
stimulus payments to beneficiaries without a tax filing
requirement, instead of requiring these individuals to file
ESP-only returns, and having the IRS send them paper checks.
Alternatively, the IRS and other Federal agencies could
determine eligibility based on available information, and the
IRS could utilize no-fee debit cards for delivery of stimulus
payments. Thank you, Mr. Chairman.
[The prepared statement of Ms. Olson follows:]
Statement of Nina E. Olson, National Taxpayer Advocate, Internal
Revenue Service
Chairmen Lewis and McNulty, Ranking Members Ramstad and Johnson,
and distinguished Members of the Subcommittees:
Thank you for inviting me to testify today regarding the status of
economic stimulus payments authorized by the Economic Stimulus Act of
2008.\1\
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\1\ The views expressed herein are solely those of the National
Taxpayer Advocate. The National Taxpayer Advocate is appointed by the
Secretary of the Treasury and reports to the Commissioner of Internal
Revenue. However, the National Taxpayer Advocate presents an
independent taxpayer perspective that does not necessarily reflect the
position of the IRS, the Treasury Department, or the Office of
Management and Budget. Congressional testimony requested from the
National Taxpayer Advocate is not submitted to the IRS, the Treasury
Department, or the Office of Management and Budget for prior approval.
However, we have provided courtesy copies of this statement to both the
IRS and the Treasury Department in advance of this hearing.
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In my testimony, I will make five main points:
1. While the IRS was a logical agency to administer the bulk of
the stimulus program, the timing of the statutory directive in February
to begin to develop and implement the program essentially required the
IRS to run two filing seasons simultaneously. In light of its limited
resources, I believe the IRS on balance has done an outstanding job of
administering both the 2008 filing season and the Economic Stimulus
Act.\2\
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\2\ Economic Stimulus Act, Pub. L. No. 110-185 (2008).
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2. In light of its limited resources, the IRS was not able to
staff its telephone lines adequately and had to make certain tradeoffs.
IRS-wide, the level of service (LOS) on the toll-free telephone lines
has dropped from 80.6 percent in 2007 to 62.8 percent year to date
(YTD) and to 42.9 percent during the week ending June 7.\3\ The LOS on
the telephone line dedicated to answering questions about stimulus
payments has been even lower--47.7 percent YTD and 30.4 percent during
the week ending June 7,\4\ and only one out of every ten callers to the
stimulus line has spoken with a customer service representative.\5\ The
IRS understandably transferred some employees from its Accounts
Management and Automated Collection System functions to help in
answering the onslaught of telephone calls. As a result, however, the
inventory of individual taxpayer correspondence relating to account
adjustments has more than doubled, creating potentially significant
burdens for affected taxpayers. The need to assign IRS personnel to
work on the stimulus program has caused core work to be placed on the
back burner in other areas as well.
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\3\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Enterprise Snapshot (week ending June 7, 2008).
\4\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus
Payments) 866-234-2942 (week ending June 7, 2008).
\5\ As of June 7, the IRS had received 27.7 million ``dialed number
attempts'' on its toll-free telephone lines concerning economic
stimulus payments. IRS Response to TAS Information Request (June 16,
2008). The number of ``dialed number attempts'' that resulted in a
conversation with a live assister was 2.9 million. Internal Revenue
Service, Joint Operations Center, Snapshot Reports: Product Line
Detail: Rebate Hotline (Economic Stimulus Payments) 866-234-2942 (week
ending June 7, 2008). About 16.8 million additional callers were
assisted through automation. In general, the IRS Joint Operations
Center tracks the IRS's performance on its toll-free lines based on
``net [call] attempts'' rather than ``dialed number attempts.'' While
``net attempts'' understates the number of calls placed to the IRS,
this testimony elsewhere cites ``net attempts'' because that data point
is more accessible and can be used to identify trends.
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3. A few glitches and taxpayer frustrations have arisen in the
course of the IRS's administration of the economic stimulus payment
(ESP) program. One glitch was that the Social Security numbers of
approximately 1,500 taxpayers were inadvertently disclosed when the IRS
routed stimulus payments to the wrong bank accounts. Although not
caused by IRS error, one source of frustration was that more than 20
million taxpayers who purchased refund anticipation loans (RALs) or
refund anticipation checks (RACs) found that they were ineligible to
receive their stimulus payments quickly via direct deposit and instead
were required to wait up to 2-1/2 months longer to receive paper
checks.
4. The IRS is conducting considerable outreach to senior citizens
and other taxpayers without a tax filing requirement to encourage them
to file Forms 1040A to claim their stimulus payments, but there are
significant barriers that will result in substantially less than full
participation by this target population.
5. There are several long-term lessons the IRS can learn from this
undertaking that may improve its effectiveness in the future. In
particular, the IRS should explore the development of a cadre of
information technology and operations analysts dedicated to initiatives
such as this, so that resources are not continually diverted from IRS
core functions or improvement projects when special needs arise, as
they often do.
I will address these issues from my perspective as the National
Taxpayer Advocate, the statutory voice for taxpayers and taxpayer
rights. I understand that the Treasury Inspector General for Tax
Administration and the Government Accountability Office are conducting
operational reviews of the ESP administration, and they will provide an
assessment at a later date.
I. The IRS on Balance Has Done an Outstanding Job of Administering the
Economic Stimulus Act.
Congress passed the Economic Stimulus Act in February in light of
deep concerns about the health of the U.S. economy. The goal of the
legislation was to stimulate the economy by placing an estimated $152
billion into the hands of consumers and businesses.\6\ Technically, the
legislation provides individual taxpayers with a credit against their
2008 tax liabilities, and taxpayers ordinarily would claim the credit
when they file their 2008 tax returns during the 2009 filing season.
Because Congress wanted to provide economic stimulus more quickly,
however, it directed the IRS to make payments as an advance against the
credit ``as rapidly as possible.'' \7\
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\6\ See, e.g., The White House, Fact Sheet: Bipartisan Growth
Package Will Help Protect Our Nation's Economic Health (Feb. 13, 2008).
\7\ IRC Sec. 6428(g)(3).
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The IRS, which already was overextended trying to cope with an
unusually challenging filing season, has managed both to deliver a
successful filing season and to develop and implement plans to make
stimulus payments to an estimated 130 million taxpayers in a remarkably
short period of time. Because eligibility for a stimulus payment was
dependent on a taxpayer's 2007 income tax return filed during the 2008
filing season, the IRS could not reasonably process stimulus payments
until after the regular April 15 filing deadline. On April 28--less
than two weeks after the regular filing deadline--the IRS began
transmitting stimulus payments, and by May, the stimulus payments were
widely credited with increasing consumer spending.\8\
---------------------------------------------------------------------------
\8\ See Kelly Evans, Stimulus Checks Aid Retail Sales, Wall Street
Journal, June 13, 2008, at A3 (noting that an unexpectedly sharp
increase in retail sales during May suggests that ``consumers spent a
chunk of their government economic-stimulus checks'' and quoting one
economist as saying that the stimulus payments would act like a ``shot
of caffeine''); Michael M. Grynbaum, Retail Sales Rise Above Forecasts,
N.Y. Times, June 13, 2008, at C1 (quoting an economist as saying: ``The
sharp improvement in May was clearly driven by receipt of the first
wave of tax rebate payments. These payments will continue to be a
positive factor for the consumer in the next couple of months.'');
Martin Crutsinger, Retail Sales Rise Unexpectedly in May, Washington
Post, June 13, 2008, at D4 (noting that the increase in retail sales
``signaled that Americans are spending their rebate payments'').
---------------------------------------------------------------------------
The delivery of stimulus payments was a massive undertaking--in
some ways akin to running a second filing season. Among other things:
The IRS quickly developed programming code so that it
could use the information reported on 2007 tax returns to determine
which taxpayers were eligible for stimulus payments and how much they
were entitled to receive.\9\
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\9\ The programming challenges have been continuing. For example,
the Economic Stimulus Act provides that no credit will be allowed if
any person listed on a tax return (i.e., the taxpayer, spouse, or any
qualifying child) does not have a valid Social Security Number. IRC
Sec. 6428(h). The IRS had to do programming to implement that
restriction. On June 17, however, the President signed into law H.R.
6081, the Heroes Earnings Assistance and Relief Tax (HEART) Act, which
allows members of the military to receive stimulus payments even where
the member's spouse does not have an SSN. The IRS is having to do
additional work to identify these taxpayers and ensure that they
receive stimulus payments.
---------------------------------------------------------------------------
The IRS developed a way to issue stimulus payments to
taxpayers with no taxable income who filed their returns
electronically. The Economic Stimulus Act provided that individuals
with at least $3,000 of ``qualifying income,'' notably Social Security
benefits, would be eligible for stimulus payments even if they had no
taxable income. However, the Act required all individuals to file tax
returns to receive stimulus payments. Returns filed by individuals who
have no tax-filing requirement and are seeking solely to claim their
stimulus payments are referred to as ``ESP-only'' returns.
In planning to process ESP-only returns, the IRS discovered a
significant systems limitation. Returns filed electronically must
include at least $1.00 of adjusted gross income (AGI) to be processed,
but many Social Security recipients have no AGI. As a workaround, the
IRS determined that it could process a return if a taxpayer lists $1.00
of AGI, but if a taxpayer with no AGI were to list AGI of $1.00, the
taxpayer technically would be furnishing inaccurate information;
taxpayers are required to sign a tax return under penalties of perjury
and declare that, to the best of their knowledge and belief, all
information on the return is ``true, correct, and complete.'' To
resolve this conundrum, the Department of the Treasury and the IRS
quickly issued guidance advising that taxpayers could list $1.00 of AGI
without violating the penalties of perjury statement for the purpose of
claiming stimulus payments.\10\
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\10\ Rev. Proc. 2008-21, 2008-12 I.R.B. 657.
The IRS posted extensive information on its website,
including straightforward Frequently Asked Questions (FAQs) and sub-
pages tailored for five populations--Social Security recipients,
Veterans Affairs recipients, Railroad Retirement recipients, low-wage
workers, and military combat personnel.\11\ As of June 11, individuals
had made 55.6 million visits to the ESP portion of the IRS website and
viewed 91.0 million pages (excluding use of the stimulus calculator
described below).\12\
---------------------------------------------------------------------------
\11\ See Economic Stimulus Payments Information Center at
www.irs.gov.
\12\ IRS Economic Stimulus Activity Report (June 17, 2008).
---------------------------------------------------------------------------
The IRS mailed notices to more than 130 million taxpayers
who filed 2006 tax returns to remind them that they would have to file
2007 returns to claim their stimulus payments.\13\
---------------------------------------------------------------------------
\13\ See IRS Notice 1377.
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The IRS mailed information packages to 20.5 million
recipients of Social Security or Veterans benefits who did not file
2006 tax returns to provide them with information on how to claim their
stimulus payments.\14\
---------------------------------------------------------------------------
\14\ See IRS Package 1040A-3.
---------------------------------------------------------------------------
The IRS developed a stimulus calculator for its website
so that taxpayers could quickly determine whether they qualify for a
stimulus payment and, if so, estimate the amount. As of June 11,
individuals had made 23.8 million visits to the website and viewed
150.6 million pages.\15\
---------------------------------------------------------------------------
\15\ IRS Economic Stimulus Activity Report (June 17, 2008).
---------------------------------------------------------------------------
The IRS worked with the Free File Alliance to ensure that
taxpayers who did not have a tax filing requirement but wanted to file
ESP-only returns through e-file could do so without charge.\16\
---------------------------------------------------------------------------
\16\ Not all members of the Free File Alliance offered this
service. To date, approximately 7.7 million ESP-only returns have been
filed, and only 708,169 have been e-filed. Thus, about nine out of ten
taxpayers filing ESP-only returns filed on paper. IRS Economic Stimulus
Activity Report (June 17, 2008).
---------------------------------------------------------------------------
The IRS transferred personnel from other functions to
help answer the barrage of telephone calls it received. As of June 7,
the IRS had received 26.7 million ``net call attempts'' related to
stimulus payments.\17\ Many calls could be addressed by automated
responses and many calls did not get through, but assisters spoke with
about 2.9 million taxpayers directly to respond to stimulus
questions.\18\
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\17\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus
Payments) 866-234-2942 (week ending June 7, 2008).
\18\ Id.
---------------------------------------------------------------------------
The IRS developed outreach initiatives and is continuing
to reach out to senior citizens and other taxpayers without a filing
requirement to encourage them to file ESP-only returns. As of June 14,
7.7 million such returns had been received.\19\
---------------------------------------------------------------------------
\19\ IRS Economic Stimulus Activity Report (June 6, 2008).
---------------------------------------------------------------------------
The IRS organized a major ``Super Saturday'' event on
March 29 to assist taxpayers in preparing ESP-only returns. IRS
employees and IRS partners staffed some 700 walk-in sites, and IRS
employees staffed the toll-free telephone line.\20\
---------------------------------------------------------------------------
\20\ IRS Wage & Investment Division, IRS puts its best face forward
on Super Saturday, Insider (available at http://win.web.irs.gov/
articles/2008/Super_Saturday.htm (last visited June 8, 2008)).
By the end of last week, the IRS had paid out about $63.9 billion
to 76.5 million households.\21\ The IRS projects that it will have paid
out a total of $99 billion by the end of 2008 and somewhat more during
the 2009 filing season.\22\
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\21\ Department of the Treasury News Release, Week 7 Wrap-Up:
Treasury Sent 9.526 Million Stimulus Payments This Week (June 13,
2008).
\22\ IRS Response to TAS Information Request (June 12, 2008).
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Overall, this is an extraordinary success story. While the
administration of the program has not been free from tradeoffs and
occasional hitches, some of which I will discuss below, it is a
testament to the IRS's leadership and its talented and dedicated
employees that it has been able to deliver the filing season and the
stimulus program so effectively with so little time to prepare.
II. The IRS Has Had to Make Certain Tradeoffs to Administer the
Program.
In passing the Economic Stimulus Act, Congress gave the IRS a
supplemental appropriation of $202.1 million to administer the issuance
of stimulus payments.\23\ While the funding is certainly helpful, the
IRS's principal challenge was the lack of time to plan. In addition to
all the programming and outreach the IRS has had to do, the IRS also
has received more than 26 million telephone calls and 316,000 visits to
its walk-in sites relating solely to stimulus payments.\24\
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\23\ Economic Stimulus Act, Pub. L. No. 110-185,
Sec. 101(e)(1)(A)(ii)(2008). Through June 5, the IRS had obligated
$138.2 million ($121.7 million in Operations Support and $16.5 million
in Taxpayer Services), but this total does not include labor charges
from the preceding 2-4 weeks. IRS Response to TAS Information Request
(June 123, 2008). The IRS anticipates it may require additional
resources due to higher than expected call volumes. Id.
\24\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus
Payments) 866-234-2942 (week ending June 7, 2008); IRS Economic
Stimulus Activity Report (June 17, 2008).
---------------------------------------------------------------------------
Even with supplemental funding, there was not enough time for the
IRS to hire, train, and deploy additional employees to answer the
phones or staff the walk-in sites. The IRS therefore faced some
difficult decisions. On the one hand, if it did not reassign employees
from other functions to assist in answering the large spike in
telephone calls, the LOS on the toll-free telephone lines would have
declined by even more than it has. On the other hand, if the IRS did
reassign employees from other functions, the core work those employees
ordinarily perform would suffer. Inevitably, there was both a decline
in the level of taxpayer service the IRS provides, particularly on its
toll-free telephone lines, and a modest reduction in its enforcement
activities.
A. The IRS Has Been Unable to Keep Up with the Large Volume of
Telephone Calls and Correspondence It Has Received.
The IRS has received 94.4 million enterprise-wide ``net call
attempts'' YTD (through June7, 2008) as compared with 51.6 million
``net call attempts'' for the same period in2007.\25\ That reflects an
enormous 83 percent increase. In percentage terms, the largest
increases have occurred since the regular April 15 filing deadline. In
the week ending June7, for example, the IRS received 6.2 million call
attempts compared with 1.6 million call attempts during the comparable
week in2007--an increase of 279 percent.\26\
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\25\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Enterprise Snapshot (week ending June 7, 2008). As noted in a
prior footnote, the term ``net call attempts'' reflects official data
that the IRS posts on its Joint Operations Center website to track the
activity on its toll-free lines, but it is a term of art that generally
understates the number of calls that taxpayers place in an attempt to
reach the IRS. The IRS separately tracks ``dialed number attempts,'' a
measure that reflects the number of times taxpayers have dialed the
toll-free number and provides a more accurate measurement of what
taxpayers experience. The IRS reports that it has received 135 million
dialed number attempts in 2008 YTD (through June 7). IRS Response to
TAS Information Request (June 16, 2008). On May 9, the peak day so far
this year, the IRS received 4.7 million dialed number attempts.
\26\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Enterprise Snapshot (week ending June 7, 2008).
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Despite the reassignment of employees from other functions and
despite the IRS's decision to extend the employment of temporary staff
hired for the filing season, the IRS has been unable to keep up with
the volume of calls. The enterprise-wide level of service (LOS) in 2008
stands at 62.8 percent YTD (through June 7) as compared with 80.6
percent in 2007 for the comparable period.\27\ In the week ending June
7, the LOS stood at 42.9 percent--down from 76.8 percent in the
comparable week last year.\28\ Focusing solely on the 3.0 million calls
to the Economic Stimulus Hotline during this recent week, the LOS was
30.4 percent.\29\
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\27\ Id. The customer service representative (CSR) LOS measures the
relative success rate of taxpayers that call for toll-free services
seeking assistance from CSRs. Generally speaking, the CSR LOS is
calculated by dividing the number of calls answered by CSRs by the
total call attempts of callers attempting to reach the CSR queue.
(Essentially, CSR LOS measures the percentage of customers who want to
reach a CSR and who are successful.) Total call attempts is the sum of
calls answered, calls abandoned by the caller, and calls that receive a
busy signal. For more detail, see CAS Data Dictionary--FY 2008, at
http://joc.enterprise.irs.gov/new/josh/reports/wits/2008/
FY%202008%20PAC%202C%20Data%20Dictionary.doc.
\28\ Id.
\29\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus
Payments) 866-234-2942 (week ending June 7, 2008).
---------------------------------------------------------------------------
During some weeks, the volume of calls has been overwhelming. In
mid May, the IRS enterprise-wide received particularly high call
volumes--9.5 million calls during the week ending May 10 (LOS = 34.3
percent) and 11.2 million calls during the week ending May17 (LOS= 34.8
percent).\30\ During the week of May 17, 6.6 million of the calls the
IRS received related to stimulus rebates, and the LOS on that line fell
to 26.3 percent.\31\
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\30\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Enterprise Snapshot (weeks ending May 10, 2008 and May 17,
2008).
\31\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Product Line Detail: Rebate Hotline (Economic Stimulus
Payments) 866-234-2942 (week ending May 17, 2008).
---------------------------------------------------------------------------
As described in footnote 27, the LOS generally measures the
treatment of taxpayers that seek to speak with a customer service
representative (CSR). However, the following chart shows the
disposition of all taxpayer calls, including total number of calls
received, the number and percentage of calls answered by a CSR, the
number and percentage of calls answered by automation, and the
percentage of calls not answered: \32\
---------------------------------------------------------------------------
\32\ This chart is compiled from IRS Joint Operations Center data.
Data for 2008 is YTD through June 7, 2008or for the week ending June 7,
2008. Data for 2007 is YTD through June 9, 2007or for the week ending
June 9, 2007. Some unassisted calls result when taxpayers hang up for a
variety of reasons. Therefore, it is not the case that the unassisted
percentage is entirely attributable to IRS limitations.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Assister Automation
Dialed Number Assister Answered Automation Assisted Unassisted
Attempts Answered Percentage Assisted Percentage Percentage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Enterprise 2008 YTD 134,656,185 28,829,133 21.4% 29,598,595 22.0% 56.6%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Enterprise 2007 YTD 62,479,800 24,677,171 39.5% 13,379,589 21.4% 39.1%
--------------------------------------------------------------------------------------------------------------------------------------------------------
ESP Hotline YTD 27,731,306 2,866,113 10.3% 16,798,968 60.6% 29.1%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Enterprise 2008 Weekly 8,657,146 1,193,032 13.8 % 2,099,177 24.2% 62.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Enterprise 2007 Weekly 2,442,566 898,378 36.8% 187,597 7.7% 55.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
ESP Hotline Weekly 3,304,474 205,572 6.2% 1,770,631 53.6% 40.2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
As this chart indicates, the percentage of calls that the IRS
successfully addressed has fallen from 60.9 percent in 2007 to 43.4
percent in 2008 and the percentage of taxpayers assisted by a CSR has
declined from 39.5 percent to 21.4 percent. These reductions are
significant.
To assist with these call volumes, the IRS is relying on some
employees from its Account Management and Automated Collection System
(ACS) functions.
In Accounts Management, customer service representatives (CSRs) who
work on account adjustments (including taxpayer correspondence, amended
returns, responses to math error notices, and injured spouse claims)
often shift between paper correspondence and assisting with the phones
as needed. As the IRS has been forced to shift employees to help in
answering the phones, the productivity of Accounts Management in
processing taxpayer correspondence relating to adjustments has
declined. As of June 7, 2008, the inventory of adjustments
correspondence involving individual taxpayers stood at 647,674, as
compared with 320,239 on the corresponding date in 2007--an increase of
102 percent.\33\ Of greater concern, the number of ``uncontrolled''
items of such correspondence stood at 22,156, as compared with 10,483
last year--an increase of 111 percent.\34\
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\33\ Internal Revenue Service, Joint Operations Center, Customer
Account Services Accounts Management Paper Inventory Reports: Weekly
Enterprise Adjustments Inventory (weeks ending June 7, 2008 and June 9,
2007).
\34\ Id.
---------------------------------------------------------------------------
ACS is the IRS's automated collection system, and taxpayers who
receive collection notices often seek to call the IRS to resolve
problems before enforced collection action is taken. For that reason,
it is critical that these taxpayers have an opportunity to get through
to an IRS collection employee.
The need to staff the stimulus lines has led to a decline in the
LOS on the ACS telephone lines.\35\ The declines have been relatively
modest YTD but have become more pronounced recently as stimulus calls
have remained at high levels. The LOS on the ACS lines maintained by
the Wage & Investment Division stands at 75.3 percent YTD and 60.9
percent for the week ending June 7 (as compared with 78.7 percent and
88.5 percent for the same periods in 2007).\36\ The LOS on the ACS
lines maintained by the Small Business/Self-Employed Division stands at
75.6 percent YTD and 71.6 percent for the week ending June 7 (as
compared with 81.8 percent and 86.1 percent for the same periods in
2007).\37\
---------------------------------------------------------------------------
\35\ There are 2,872 full-time equivalent employees (FTE) in the
ACS function (1,545 in the Wage & Investment Division and 1,327 in the
Small Business/Self-Employed Division). Through May, the IRS had
shifted 116 FTE to answer ESP telephone calls and projects that it will
shift another 80.1 FTE in June and July. IRS Response to TAS
Information Request (June 13, 2008).
\36\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Product Line Detail: W&I ACS 800-829-7650 (week ending June 7,
2008).
\37\ Internal Revenue Service, Joint Operations Center, Snapshot
Reports: Product Line Detail: SB/SE ACS 800-829-3903 (week ending June
7, 2008).
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The IRS projects that it will receive an additional 6.6 million
stimulus-related calls from June through September.\38\ Because the IRS
received 3.0 million calls during the first week of June alone, that
projection may need to be reevaluated.
---------------------------------------------------------------------------
\38\ IRS Response to TAS Information Request (June 13, 2008).
---------------------------------------------------------------------------
B. The Reduction in Level of Service on the Phones and Delays in
Processing Correspondence Can Harm Taxpayers and Potentially
Erode Compliance
While I understand that the overriding goal of the stimulus
legislation was to put money into the hands of U.S. households as
quickly as possible and the IRS was a logical agency to administer the
program, I am concerned by the sharp reduction in the IRS's ability to
answer calls from taxpayers and timely process taxpayer correspondence.
The declines in the level of service on both the Accounts
Management and the ACS telephone lines and the increasing inventories
of unaddressed correspondence and other submissions are not mere
statistics. These declines have real, negative impact on taxpayers,
increasing their compliance burden. For example, a taxpayer who cannot
get through to the IRS to negotiate an installment agreement may
instead find his paycheck levied--unnecessarily. A taxpayer who is
under audit and submits documentation may receive a statutory notice of
deficiency because the IRS did not process the correspondence or
amended returns timely. Thus, the taxpayer will incur additional
expense and burden by having to file a petition with the United States
Tax Court or request an audit reconsideration.
From a broader policy perspective, maintaining a high level of
taxpayer service is crucial to tax administration. First, it is a basic
obligation of the government. If we are requiring taxpayers to pay a
large percentage of their incomes to the government, the least we can
do is make it as easy as possible for taxpayers to comply. When
taxpayers cannot get through to the IRS, they get frustrated, and the
experience leaves them with a negative impression of their government.
Moreover, when a taxpayer is facing enforcement action and either
believes the action is unwarranted or wishes to talk with an IRS
employee to try to work out a payment arrangement, it is absolutely
critical that the taxpayer be able to reach an employee.
Second, the inability of the IRS to respond adequately to taxpayers
creates disillusionment and may, in the long term, reduce compliance by
angry and frustrated taxpayers.
In this instance, the congressional objective of providing
immediate economic stimulus likely outweighed the consequences I have
described. But it is important to keep in mind that there have, in
fact, been trade-offs, and some things will fall through the cracks if
the IRS is simultaneously asked to run a filing season and administer a
stimulus program of this magnitude on short notice.
C. The IRS Projects That Its Administration of the ESP Program Will
Reduce Collections Slightly.
Because the IRS has reassigned employees from ACS to assist in
administering the stimulus payments, the IRS estimates that the loss in
collection revenue will be approximately $565 million.\39\ In FY 2007,
for comparison, IRS net collections totaled $2.4 trillion,\40\ and IRS
enforcement revenue totaled $59.2 billion.\41\
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\39\ Id. According to IRS data, ACS collections are 35.0 percent
lower in May 2008 as compared with May 2007. IRS Collection Activity
Reports 5000-1 and 5000-2.
\40\ IRS Data Book: 2007, Table 1.
\41\ IRS Fiscal Year 2007 Enforcement and Services Results
(accompanying chart) (available on the IRS website).
---------------------------------------------------------------------------
III. There Have Been Glitches and Taxpayer Frustrations, but They Have
Been Minor and Relatively Few.
During the administration of the stimulus program, the IRS has
encountered a few problems and taxpayers have experienced a few
additional sources of frustration that are not attributable to IRS
errors.
As discussed above, the largest source of taxpayer frustration has
been the difficulty of reaching an IRS telephone assistor on the toll-
free lines. I will discuss other issues below.
As an initial matter, I note that the IRS reports it has not
detected significant problems involving identity theft (e.g., the
misuse of another person's Social Security number) with the stimulus
program. Particularly because millions of individuals filing ESP-only
returns have not filed tax returns for a number of years, there was
concern that upon filing, some taxpayers would discover that someone
else had been filing returns using their SSN, causing the IRS to freeze
the stimulus payment. In response to these concerns, the IRS reports
that it established a specialized unit to analyze ESP-only returns for
the purpose of identifying potential identify theft-related problems.
The IRS reports that it has identified only 25 instances of potential
identity theft to date.\42\ While this report is encouraging, I remain
concerned that the IRS does not have a comprehensive means to identify
and track all cases of identity theft. The Federal Trade Commission
(FTC) has reportedly received approximately 150 complaints about
identity theft problems relating to stimulus payments, and a quick
survey of TAS's Local Taxpayer Advocates about stimulus-related
problems turned up 13 cases. Neither the FTC nor TAS complaints have
been validated, but they do suggest that the universe of ESP identity
theft-related cases is likely to be somewhat larger than the current
IRS data suggest. I will continue to monitor identity theft problems
arising in the context of the stimulus program.
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\42\ IRS Response to TAS Information Request (June 13, 2008).
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A. In About 350,000 Cases, Taxpayers Have Not Received Additional
Stimulus Payments of $300 Per Child to Which They Are Entitled.
Under the Economic Stimulus Act, a taxpayer is entitled to receive
an additional payment of $300 for each dependent who is a ``qualifying
child.'' \43\ Thus, for example, a couple that has four children and
files a joint return may be entitled to a total stimulus payment of
$2,400 (i.e., $1,200 plus $300 for each of four qualifying children).
---------------------------------------------------------------------------
\43\ IRC Sec. 6428(b)(1)(B) (adopting the definition of a
``qualifying child'' in IRC Sec. 24(c)).
---------------------------------------------------------------------------
On Forms 1040 and 1040A, IRS programming code looks to whether the
Child Tax Credit checkbox on line 6c, column (4) is checked to
determine whether to allow the additional $300 credit. On approximately
350,000 returns, this box was not checked even though the taxpayer was
entitled to an additional payment with respect to one or more children.
The IRS reports that there were two sources of this problem. First,
some taxpayers who prepared their returns on paper did not check the
box. Second, two tax software products used primarily by tax
professionals were not properly programmed to check the box.
The IRS reports that it will be able to identify returns where a
taxpayer had a qualifying child but did not check the box and that it
will send paper checks to the affected taxpayers beginning immediately
after the regularly scheduled payment of stimulus checks ends in
July.\44\
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\44\ Statement issued by IRS Office of Media Relations
(unpublished).
---------------------------------------------------------------------------
B. Approximately 1,500 Stimulus Payments Were Transmitted into Wrong
Bank Accounts and Personally Identifiable Information Was
Compromised.
On May 15, Newsday reported that some stimulus payments were
deposited electronically into the wrong taxpayers' bank accounts. The
article said that one taxpayer reported receiving a deposit of $1,800
bearing another taxpayer's SSN.\45\
---------------------------------------------------------------------------
\45\ Carol Polsky, IRS: Some Stimulus Checks Misrouted, Newsday,
May 15, 2008 at A18.
---------------------------------------------------------------------------
The IRS has acknowledged that a programming error caused 1,500
stimulus direct deposits to be transmitted to incorrect bank accounts
and that Social Security numbers were transmitted along with the
payments.
The IRS reports that it quickly corrected the problem and that no
additional erroneous deposits have been made.
According to the IRS, almost all taxpayers who should have received
their payments electronically have since been sent checks. The
remaining taxpayers will receive their checks within the next few
weeks. The banks have returned approximately 250 of the erroneous
deposits to date, and the IRS is seeking to recover the remaining
erroneously transmitted funds.
The IRS reports that it is also determining whether to provide the
taxpayers whose SSNs were exposed with a credit monitoring service.\46\
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\46\ IRS Response to TAS Information Request (June 13, 2008).
---------------------------------------------------------------------------
C. Up to 22,000 Taxpayers May Have Received a Notice Containing
Information About a Different Taxpayer's Stimulus Payment.
The IRS is sending a notice, CP 1378, to all confirmed recipients
of stimulus payments to explain how the amount of their stimulus
payment has been calculated. The IRS reports that in up to about 22,000
cases, the first page of the notice contained information for one
taxpayer while the second page carried information for a different
taxpayer. These notices contained truncated SSNs on the first page, and
no personally identifiable information on the second page.\47\
---------------------------------------------------------------------------
\47\ Id.; see also Diane Freda, Tax Refunds: IRS Investigates
Economic Stimulus Payments After Statements Mailed to Wrong People,
BNA Daily Tax Report (May 16, 2008).
---------------------------------------------------------------------------
The IRS reports that it has received slightly more than 200
inquiries thus far, a relatively low number which could indicate that
not all 22,000 notices were mailed in error. It reports that it cannot
determine the exact number.
The IRS reports that the problem was attributable to an error by a
print vendor and was limited to one printer at one site.\48\ The vendor
will issue corrected notices with the following explanation of the
error:
---------------------------------------------------------------------------
\48\ IRS Response to TAS Information Request (June 13, 2008). The
IRS provided the following additional explanation:
The error was made during a 15-minute run in which the printer
feeder was, at times, pulling two pages through. The quality control
employee responsible for checking runs at certain intervals did not
pull the six samples he should have at the beginning of the new run.
The mistake was discovered when the machine went down for another
reason and a sample was pulled at that point. The CEO took immediate
and decisive action, and he also made changes to the quality review
process. They are now using two quality reviewers instead of one, and
quality review is taking place at 15-minute intervals instead of 30-
minute intervals.
---------------------------------------------------------------------------
Due to an error by the print vendor, your original notice may have
included information regarding another taxpayer's stimulus payment. To
ensure you receive the originally intended information for you, we are
resending this notice. We apologize for any inconvenience this may have
caused.
The IRS's Privacy, Information Protection, and Data Security
Advisory Committee was notified of a data breach with respect to the
taxpayers affected by the CP 1378 print problem. The committee agreed
unanimously that the level of risk of identity theft posed by the
erroneous mailing did not rise to the level requiring data loss
notification and the invocation of credit monitoring and other
services. The committee reached a consensus that the corrected notice
with the apology statement quoted above is sufficient notice to these
taxpayers about the incident.\49\
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\49\ Id.
---------------------------------------------------------------------------
D. More Than 20 Million Taxpayers Who Purchased RALs or RACs Must Wait
Up to 2-1/2 Months Longer Than Other Taxpayers to Receive Their
Stimulus Payments.
As of June 10, the IRS reports that 9.9 million taxpayers have
purchased refund anticipation loans and 10.5 million taxpayers have
purchased refund anticipation checks in2008.\50\ When a taxpayer
purchases either of these products, a temporary bank account is created
in the taxpayer's name and the taxpayer's refund is paid into that
account, but the taxpayer does not control the account.
---------------------------------------------------------------------------
\50\ IRS Response to TAS Information Request (June 12, 2008).
---------------------------------------------------------------------------
In general, the IRS is issuing stimulus payments electronically if
bank account routing information appears on the taxpayer's 2007 tax
return Because RAL and RAC accounts are temporary and not controlled by
the taxpayer, however, stimulus payments deposited into those accounts
would not reach the taxpayer. Fortunately, the IRS receives an
electronic indicator when a RAL or RAC is associated with a return, and
the IRS was able to program its systems to send paper checks to all
taxpayers whose 2007 returns were accompanied by one of the
indicators.\51\
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\51\ In February, one tax-preparation company notified the IRS that
it had failed to include RAL indicators on approximately 450,000
electronically filed returns. The company and the bank providing the
RALs were able to provide the routing transit numbers (RTNs) used for
the RALs. The company provided this information early enough so that
the IRS was able to include in its programming a requirement to convert
returns bearing those RTNs to paper checks. The IRS reports that the
taxpayers whose returns were involved generally did not experience
delay in receiving their stimulus payments. IRS Response to TAS
Information Request (June 13, 2008).
---------------------------------------------------------------------------
These taxpayers are receiving their stimulus payments according to
the schedule established for the issuance of paper checks--with some
coming as late as mid July--instead of receiving their stimulus
payments electronically in May. Thus, more than 20 million taxpayers
who purchased RALs and RACs must wait up to 2\1/2\ months longer to
receive their stimulus payments than taxpayers who did not purchase
those products.
Some taxpayers who purchased RALs or RACs have complained that
their preparer or software vendor did not inform them that their
stimulus payments would be delayed. While these delays are not
attributable to IRS error, I understand the frustration these taxpayers
are experiencing, and I believe this is one reason among many why RALs
and RACs are not a good choice for most taxpayers.\52\
---------------------------------------------------------------------------
\52\ These problems also demonstrate why the IRS should develop
plans to deliver tax refunds via Treasury-issued debit cards, as
Treasury is doing currently for Social Security payments. See Lori
Montgomery, Treasury Dept. Rolling Out Social Security Debit Card,
Washington Post, June 10, 2008, at D3.
---------------------------------------------------------------------------
E. The IRS Has Deployed a ``Where's My Stimulus Payment?'' Application
on Its Website But Its Usefulness Is Limited and May Be
Contributing to More Telephone Calls.
For several years, the IRS website has provided an automated self-
service application known as ``Where's My Refund?'' that allows
taxpayers to check on the status of their refunds within days of
submitting their returns. In an effort to assist taxpayers and reduce
the volume of telephone inquiries regarding stimulus payments, the IRS
developed an application known as ``Where's My Stimulus Payment?''
However, the IRS has told us that the data source that populates the
application is updated at the time the stimulus payment is processed.
As a consequence, the IRS acknowledges that ``Where's My Stimulus
Payment?'' may not reflect electronic payments until after the funds
have been deposited into the taxpayer's bank account.\53\
---------------------------------------------------------------------------
\53\ IRS Response to TAS Information Request (June 13, 2008).
---------------------------------------------------------------------------
Because of the ease with which taxpayers may access ``Where's My
Stimulus Payment?'' and the uncertainty many taxpayers inevitably feel
when they find no information, it is possible that this application may
inadvertently be causing confusion and thereby increasing call volumes.
The IRS is encouraging taxpayers to use its website to obtain
information on stimulus payments, but when they try, they often cannot
get the information they are looking for, and this uncertainty likely
drives them to use the toll-free telephone lines. The IRS should review
this application and identify improvements that can eliminate or
minimize this downstream impact for future initiatives.
F. Local Taxpayer Advocates Report That Taxpayers Are Encountering Some
Difficulties in Obtaining Their Economic Stimulus Payments.
A recent informal survey of Local Taxpayer Advocates has identified
a number of issues that have resulted in incorrect, delayed, or
unexpectedly reduced economic stimulus payments and may lead to
increased IRS and Taxpayer Advocate Service (TAS) telephone volumes.
The most common request for TAS assistance regarding ESPs is the
taxpayer's need for an expedited refund. Generally, taxpayers who are
experiencing a hardship can request a ``manual refund'' or ``offset
bypass refund'' (OBR).\54\ A manual refund speeds up the process by
which a taxpayer receives his or her refund. An OBR permits a
taxpayer's refund to bypass any outstanding tax liability.\55\
---------------------------------------------------------------------------
\54\ IRM 21.4.6.5.12.1 (March 19, 2008).
\55\ If a taxpayer claims a refund on his regular income tax return
but the taxpayer also owes federal taxes for another tax period or tax
type, the refund may be offset against the outstanding tax liability.
IRC Sec. 6402(a). However, when the taxpayer can demonstrate that
failure to receive the refund will cause a hardship, the IRS can
implement an ``offset bypass'' and issue a ``manual refund'' (i.e.,
override the automated offset process). IRM 21.4.6.5.12.1 (March 19,
2008).
---------------------------------------------------------------------------
As both a policy and practical matter, the IRS decided not to allow
manual refunds or offset bypasses for ESPs except in certain limited
circumstances. \56\ Thus, when taxpayers experiencing hardships call
the IRS or TAS for an expedited stimulus payment or because they have
not received their payment when or as expected, their hopes are dashed
when they learn that their stimulus payment cannot be expedited or will
offset a back tax debt. For some taxpayers who received manual
(hardship) direct deposit refunds for their 2007 returns, the IRS
systems may delay their ESP longer than projected because of holds on
their accounts following the manual refund. The IRS's failure to
adequately publicize or explain the offset rule leads to taxpayer
confusion and frustration as well as increased taxpayer calls. It is
not clear whether, with additional lead time, the IRS could have
identified a way to allow for ESP manual refunds or OBRs in hardship
situations.
---------------------------------------------------------------------------
\56\ The IRS will issue a manual refund or OBR on a stimulus
payment when the IRS has placed a freeze on the taxpayer's return, such
as when the return is identified by the Questionable Refund Program, in
identity theft situations, or when duplicate returns have been filed.
IRM 21.6.3.6.6.3 (May 14, 2008).
---------------------------------------------------------------------------
Local Taxpayer Advocates also reported that the processing of
Injured Spouse claims has delayed ESPs.\57\ They note that the
disbursement of payments is inconsistent when one spouse on a Married
Filing Joint return claims Injured Spouse status. In some instances,
although IRS systems showed the ``Injured Spouse'' indicator for that
return which should have resulted in a 50-50 split of the ESP (with
one-half offset to the debtor spouse's IRS debt and one-half issued to
the non-debtor spouse), the full amount of the ESP was offset and
applied to the debtor spouse's IRS debt. In other instances, the full
amount of the ESP was issued in two checks even though there was an
existing IRS debt for the primary spouse.
---------------------------------------------------------------------------
\57\ Injured Spouse is a process by which a non-debtor spouse
informs the IRS, via Form 8379, Injured Spouse Allocation, that the
portion of a tax refund attributable to the non-debtor spouse should
not be offset against the debtor spouse's tax liability. See IRM
21.4.6.5.9 (Oct. 1, 2007).
---------------------------------------------------------------------------
TAS identified other instances in which taxpayers have encountered
problems obtaining their stimulus payments because the law or systems
prevent it:
Taxpayers whose 2007 accounts are ``frozen'' will not
receive their stimulus payments according to the published schedule.
A taxpayer's stimulus payment will be delayed when the
name and SSN of one spouse do not match Social Security records. This
situation commonly occurs when a spouse has changed his or her name as
a result of a change in marital status but has not notified the Social
Security Administration of that change. In normal tax return
processing, the IRS can correct its records by looking at its own data
and process the return. Under the ESP initiative, however, these
taxpayers have no recourse other than claiming a credit on a 2008
return with a valid name and SSN match.
Taxpayers who receive supplemental security income (SSI)
and have no adjusted gross income are not eligible to receive stimulus
payments, yet due to confusion, some have filed ESP-only returns and
are now wondering why they have not received their payments.
Many Local Taxpayer Advocates noted that the influx of calls to TAS
offices was in part the result of IRS and other publicity focusing on
the maximum amount of the stimulus payment and the schedule of
payments, without highlighting the exceptions to the schedule or the
different levels of payments. One exception in particular caused
confusion--taxpayers who filed on April 15 would not have payments
issued according to the published schedule. The IRS did not make
sufficiently clear that returns had to be processed by April 15 for
taxpayers to receive payments according to the schedule.
IV. ESP Outreach Poses Many Challenges to the IRS and Its Stakeholders.
The Economic Stimulus Act payments are based on a simple premise--
get money out to taxpayers and certain other individuals quickly to
stimulate the economy. The details of the eligibility for payment,
application for payment, and method of payment delivery, however, are
anything but simple. These complexities make it extremely difficult for
the IRS and its stakeholders to craft a clear, comprehensible, and
succinct communications campaign. Indeed, when I taped a video message
early in the filing season presenting information that I believed
taxpayers needed to know about ESPs, the video (a ``TAScast'') ran more
than seven minutes long.\58\
---------------------------------------------------------------------------
\58\ See http://www.tax-toolkit.com/Video_Tax_Help.cfm.
---------------------------------------------------------------------------
An effective outreach and education strategy is especially critical
for the estimated 20.5 million individuals who have no tax return
filing requirement yet receive Social Security or Veterans Affairs
benefits. These individuals must take an affirmative step to receive
their stimulus payments--i.e., they must file a tax return.
Communicating with this population presents a significant challenge,
given the complications of age and disability. While the IRS, TAS, and
our stakeholders have taken some effective steps and certainly can do
more in this regard, the ESP requirements are so complex that no amount
of communication by the IRS will reach all 20.5 million individuals,
and even when the message is delivered, it may not be accurately
understood. For the reasons outlined in the following discussion, it
may be that the IRS is not the appropriate agency to deliver payments
to special populations who otherwise would have no contact with the
IRS.
A. The IRS's General Communications Strategy Is a Good Starting Point
for More Specific Outreach Initiatives.
The IRS began developing an outreach and communications plan as
soon as it learned of a potential economic stimulus package.\59\ This
plan set out IRS outreach in four phases:
---------------------------------------------------------------------------
\59\ IRS Wage & Investment Division (Customer Assistance,
Relationships and Education), FY 2008 Economic Stimulus Payments (ESP)
Outreach Campaign (April 24, 2008).
1. 2008 Filing Season Efforts (through April 15): ``Getting the
Word Out Far and Wide'';
2. Post-April 15 Efforts (April 15--June): ``It's Not Too Late to
File for ESP'';
3. Community Focused Campaigns (June--August): ``Enriching the
Economy''; and
4. Pre-October 15 Efforts (September--October 15): ``Don't Let ESP
Pass You By.'' \60\
---------------------------------------------------------------------------
\60\ Id.
In implementing this strategy, the IRS developed press releases, an
extensive website, FAQs, and sub-pages for targeted populations. It
worked through its external partners, such as the National Governors
Association, the National Council on Aging, the American Association of
Retired Persons, and Catholic Charities. The IRS developed multi-staged
mailings to taxpayers who filed their 2006 returns and to taxpayers who
received Social Security or Veterans Affairs benefits but did not have
a 2006 filing requirement. The mailings to Social Security and Veterans
Affairs beneficiaries described the steps individuals should take to
receive stimulus payments and included a Form 1040A and instructions.
On March 29, 2008, IRS Taxpayer Assistance Centers (TACs) around
the country hosted a ``Super Saturday'' where IRS employees, including
TAS employees, helped taxpayers otherwise without a tax-filing
requirement to complete their ``ESP-only'' returns on Forms1040A. The
IRS and its partners ran approximately 700 Super Saturday sites
nationwide. In addition, IRS Accounts Management and ACS employees
staffed toll-free phone lines to answer taxpayers' ESP-related
questions.\61\
---------------------------------------------------------------------------
\61\ IRS Wage & Investment Division, IRS puts its best face forward
on Super Saturday, Insider (available at http://win.web.irs.gov/
articles/2008/Super_Saturday.htm (last visited June 8, 2008)).
---------------------------------------------------------------------------
During the filing season, TACs were open for extended hours on
several Saturdays. For the post-April 15 phase, the IRS plans to keep
the TACs fully operational, Monday through Friday from 8:30 AM to 4:30
PM, and to continue to assist customers with ESP applications as well
as offer free return preparation assistance to individuals and families
whose income is $40,000 or less. The IRS states that no advance
appointment is required for preparation of ESP-only returns.\62\
Moreover, TAS was informed that 67 ``partners'' (mostly or all VITA
sites) in 21 states have scheduled ESP tax preparation activities
beyond June 16. While these partner activities are helpful, these sites
do not have a national scope. For example, there are just two sites in
the State of New York (Jamaica and Kingston), with none in
Manhattan.\63\
---------------------------------------------------------------------------
\62\ IRS Response to TAS Information Request (June 13, 2008).
\63\ Email from SPEC Senior Communications Analyst to TAS Senior
Program Analyst (June 11, 2008) (email on file with the Taxpayer
Advocate Service).
---------------------------------------------------------------------------
In addition to these national scope activities, IRS Stakeholder
Partnerships, Education and Communication (SPEC) and Government Liaison
employees have organized many local outreach sessions with stakeholders
and congressional offices. TAS employees also participated in these
activities.
B. The Taxpayer Advocate Service Has Partnered with Local IRS Personnel
and Initiated Grassroots Outreach.
The Taxpayer Advocate Service's public information, education, and
outreach efforts have also helped to improve public awareness. When
President Bush signed the Economic Stimulus Act of 2008 into law in
February, our Local Taxpayer Advocates (LTAs) were in Washington, DC,
delivering the National Taxpayer Advocate's 2007 Annual Report to
Congress to their congressional offices. We immediately provided the
LTAs with ESP talking points that enabled them to address questions
from congressional staffs. The LTAs continued their outreach in the
weeks that followed, supporting congressional offices and the IRS's
Governmental Liaison staff at ESP events and working with other IRS
functions and local organizations to inform taxpayers about stimulus
payments. Because all LTAs are required to conduct 40 grassroots
outreach events every year, the foundation for this initiative was
already in place.\64\
---------------------------------------------------------------------------
\64\ Taxpayer Advocate Service, FY 2008 Operational Priorities,
TAS-13.1-1007-002, Attachment 1 (Nov. 2, 2007), at 20.
---------------------------------------------------------------------------
TAS moved quickly to bring the Low Income Taxpayer Clinics (LITCs)
into the ESP outreach process. On March 6, TAS hosted a nationwide
conference call on ESP issues for LITCs, and IRS representatives from
the Office of Chief Counsel, Communications and Liaison, and the Wage
and Investment Division's Customer Assistance, Relationships, and
Education (CARE) organization participated. This gave approximately 100
LITC participants an opportunity to bring specific questions the
clinics had encountered in working with taxpayers to the attention of
the IRS.
TAS also collected and provided the IRS with comments from both the
LITCs and Taxpayer Advocacy Panel members on an early draft of the Form
1040A-3 information package for the ESP-only population. TAS created an
Economic Stimulus page on its public website \65\ and provided an e-
mail address to the LITCs to pose questions. As part of this
coordinated approach, with the goal of using all the tools at hand, I
recorded a ``TAScast'' video message for the ESP-only population. TAS
placed this video on its three external ``toolkit'' websites and
marketed it through YouTube.\66\ Additionally, we placed an IRS video
(in English and Spanish) for Social Security and Veterans Affairs
benefits' recipients and an American Sign Language video on our Tax
Literacy Toolkit.
---------------------------------------------------------------------------
\65\ Taxpayer Advocate Service, Economic Stimulus Payments, at
http://www.irs.gov/advocate/article/0,,id=179751,00.html.
\66\ The websites include the Tax Literacy Toolkit at http://
www.tax-toolkit.com/Welcome.cfm, the Electronic Press Kit at http://
www.irs-tas.com, and the Advocate Toolkit, which is primarily a
resource for LTAs, at http://advocatetoolkit.com.
---------------------------------------------------------------------------
Local Taxpayer Advocates have participated in many of the IRS
initiatives and conducted their own outreach through their grassroots
contacts. In Philadelphia, TAS participated in several ``Senior Expos''
sponsored by local and state representatives, providing general and
specific information about the ESP program. Detroit TAS participated in
a webcast with a local television station. In Mississippi, TAS provided
information to employees of the Jackson Senior Service Division
regarding the stimulus payments. These employees in turn provided
information to the senior-citizen homes and other senior-citizen groups
throughout the city.
Low Income Taxpayer Clinics also are doing their share of ESP
outreach and education. Clinics have conducted outreach presentations
at elderly and disabled low income housing facilities in New Hampshire,
given interviews on local Spanish language television stations in
Central California, made presentations to local senior centers and
English as a second language (ESL) classes in Arkansas, conducted
outreach to a foster grandparents association and an independent living
service organization in Richmond, Virginia, and participated in many
other activities throughout the United States in partnership with VITA
sites and other nonprofit organizations.
C. Barriers to Obtaining Participation of Social Security and Veterans
Affairs Beneficiaries Present a Challenge to the IRS.
As noted above, the IRS developed a special 1040A package that it
sent to about 20.5million Social Security and Veterans Affairs
beneficiaries who did not file tax returns for 2006. To date,
approximately 7.7 million of these individuals have filed 2007
returns.\67\ The IRS is planning to send another notice to those
taxpayers who have not yet filed. This second notice will be identical
to the first, except that it will incorporate some visual improvements,
including a larger font size for the notice itself and an easier-to-
read font color. The accompanying Form 1040A return will not be in a
larger font.
---------------------------------------------------------------------------
\67\ IRS Economic Activity Stimulus Report (June 17, 2008).
---------------------------------------------------------------------------
Notwithstanding the efforts of the IRS, TAS, and outside groups to
reach this population, there are major challenges to achieving a
significant participation rate. In addition to the fundamental
complexity of the program, challenges include the following:
Some senior citizens may view filing a return as
requiring too much effort for $300.
This population may lack Internet access or may be
uncomfortable obtaining tax information from the Internet.
This population may lack the mobility necessary to obtain
assistance in applying for the ESP.
Members of this population may be incapacitated and under
the care of guardians, conservators, or nursing homes and hospitals.
The return preparation cost may be too great and they may
not know how to obtain free return preparation.
Individuals who have not had contact with the IRS for
years may be unwilling to start filing with the IRS, for fear of losing
government benefits or because of a more generalized fear about contact
with a federal enforcement agency.
Confusing messages, conflicting information, not enough
information, or too much information can all discourage participation.
The following is an email I received from the Director of a Low
Income Taxpayer Clinic in the Midwest, which illustrates some of the
confusion relating to the ESP program:
Communications about the ESP was TERRIBLE. Taxpayers received too
much information--much of it incorrect--from too many places. Taxpayers
were just confused and overburdened with information--from local and
national news programs to local and national TV commercials there was
information (misinformation) on ESP. There is going to be a lot of
duplicate filings of the 1040A (ESP) and it is not ``fraud'' it is just
``misunderstanding'' by the individuals filing these returns. We have
already been asked to participate in many regional news programs to
answer taxpayers questions about why people have not received their ESP
based upon the timeline on IRS.gov and why EVERYONE is NOT receiving
$600 for themselves and $300 for all of their dependents.
We heard from many Social Security/Disability recipients who filed
a tax return for 2007 in February, prior to the Social Security
Administration mailing, thinking they also had to send in the 1040A to
receive their ESP. Even though the mailing sent to them by the Social
Security Administration said at the top that they did not have to file
if they had already filed a 2007 tax return they either could not or
did not read this message or they were just afraid they would not get
the ESP unless they filed the form they received in the mail.
The individuals who are having to file for the ESP only are not the
most ``sophisticated'' of taxpayers. Many have not filed a tax return
in many years due to their age. They just do not understand the
process. We had (and are still having) numerous calls from VITA/TCE
clients in our area thinking the VITA/TCE preparer made a mistake
because the VITA/TCE site filed their ESP online or on a ``white form''
while the color of the paper of the form they received in the mail was
pink. Many of these VITA/TCE clients wanted to know if it was alright
that they had copied the information from the ``white'' copy given to
them by the VITA/TCE volunteer to the pink paper return. When asked if
the ``white'' form had already been filed they answered either yes or I
don't know for sure. Even when we told them the ``white'' form that had
been filed would work, many told us they were going to go ahead and
mail the pink form because they wanted to be sure they received their
money.
People still do not understand the $ amount they are receiving and
or why. There was too much media raising individuals expectation that
everyone would receive $600 and $300 for their dependents. I have had a
local ``diamond'' outlet's commercial repeated to me many times as
``proof'' they were suppose to receive $600 for themselves and $300 for
their dependents. The common comment is ``It is you and the IRS who do
not understand the amount I should have received, don't you listen to
TV, etc.'' \68\
---------------------------------------------------------------------------
\68\ Email from the Director of a Low Income Taxpayer Clinic (email
on file with the Taxpayer Advocate Service).
---------------------------------------------------------------------------
Given the message saturation and confusion described in the email
above, coupled with the characteristics of the target population, is it
any wonder that the IRS's phone lines have been swamped and that
millions of eligible individuals have not yet filed?
V. Some Modest Suggestions for Future Initiatives
One lesson to be learned from this year's ESP initiative is that
message saturation creates taxpayer confusion and causes unnecessary
work for the IRS. Although a saturation campaign certainly gets the
word out about a program, the owners of the campaign quickly lose
control of the message. Thus, advertising by diamond merchants,
department stores, auto dealers, and electronics stores enticing
taxpayers to spend stimulus payments on their products reinforce an
inaccurate message. Taxpayers come to expect the maximum stimulus
payment amount and don't understand the exceptions. This uncertainty
and its consequences can even defeat the underlying purpose of the
stimulus payments. Although taxpayers may spend more--either on credit
or with savings--in anticipation of their stimulus payments, they may
end up financially harmed if they do not receive all or part of the
payment they are expecting and go into debt. The problems with a
saturation message campaign are compounded if the design of the program
itself is so complex that it takes twenty pages of Frequently Asked
Questions and a seven minute podcast to explain it. If Congress decides
to enact another ESP, it should consider how to simplify the
eligibility rules so that they lend themselves to easy communication.
Such simplification may mean that some individuals receive more or less
than they might under the current ESP, but this trade-off for clarity
would be well worth it.
A second lesson is that when an initiative targets a population
that does not otherwise have contact with the IRS, it may be better to
utilize another federal agency for payment delivery. The 20.5 million
Social Security and Veterans Affairs beneficiaries all receive payments
from those agencies, and many of those payments are directly deposited
into bank accounts. Why not find a way to let those agencies make
stimulus payments to individuals without a tax filing requirement
instead of requiring them to file ESP-only returns and having the IRS
then send them paper checks? The Social Security Administration and the
Treasury Department recently announced the availability of a no-fee
debit card on which unbanked Social Security recipients may receive
their benefits.\69\ Why not download the value of the stimulus payments
onto such cards?
---------------------------------------------------------------------------
\69\ The Department of the Treasury estimates that by converting
the 10.5 million people who still receive paper Social Security checks
once a month to electronic payments, the Federal Government could save
up to $42 million a year. Lori Montgomery, Treasury Dept. Rolling Out
Social Security Debit Card, Washington Post, June 10, 2008, at D3.
---------------------------------------------------------------------------
Third, where there are no better alternatives than for the IRS to
deliver such payments, the IRS and other federal agencies could
cooperate to determine the exact payments to these special populations
and the best method for delivering them. The ESP could be designed so
that the IRS, the Social Security Administration, and the Department of
Veterans Affairs work together to identify which beneficiaries do not
have a filing requirement but have at least $3,000 in benefits. Why
force these individuals to file a tax return? Why not authorize the
agencies to determine eligibility based on available information? \70\
Moreover, once the IRS determines eligibility and the amount of
payment, the IRS itself should develop the ability to utilize no-fee
debit cards to deliver stimulus payments (and all tax refunds).
---------------------------------------------------------------------------
\70\ It is our understanding that this approach was adopted with
the current ESP program in Puerto Rico and Guam.
---------------------------------------------------------------------------
Fourth, I note that one of the circumstances that made the ESP
initiative so challenging was the short timeframe the IRS had from the
time the bill was enacted until the time the first ESP was scheduled to
go out to taxpayers. The IRS found itself scrambling to work out the
logistics, such as developing an outreach strategy and materials,
anticipating taxpayer questions, and strategizing about the best way to
get answers to these questions to the public. Although the ESP program
may seem like a one-time occurrence, the IRS often faces unanticipated
events, including natural disasters, that affect taxpayers and their
ability to comply with their tax obligations, thereby requiring special
rules, procedures, and outreach. Instead of scrambling to address the
unexpected, the IRS should be able to plan for it.
There are several concrete steps the IRS can take to prepare for
the next unanticipated event, whether it is a congressionally mandated
program or a Presidentially declared disaster. Although the IRS has an
internal Disaster Readiness Group, I recommend that its mission be
expanded and that the IRS create a larger and more diverse emergency
readiness group of external partners from which it can solicit feedback
on its outreach efforts. The emergency readiness group should be active
and available all year, ready to provide guidance on the most effective
way to communicate with taxpayers, especially groups such as the
Limited English Proficiency population, the elderly, and people with
disabilities. The group should include representatives from tax
professionals associations, state governments, LITCs, the Taxpayer
Advocacy Panel, the National Disability Institute and other SPEC
stakeholders.
Fifth, for the IRS to implement emergency programs, it must
maintain a workforce at sufficient levels to accommodate these demands
without compromising its service levels or throwing its modernization
efforts off course. Therefore, Congress should provide the IRS with
funding to maintain a cadre of employees--whether they be seasonal or
permanent--to address these situations and programmers who can work on
these projects so that the IRS does not fall behind on its core
business systems improvements. The internal cadre should conduct
reviews after each unanticipated event to incorporate lessons learned
and improvements into its standard operating procedures. Moreover,
where glitches such as those with manual or offset bypass refunds or
injured spouse are identified, the cadre can work on solutions in the
downtime between events.
Finally, the communications challenges posed by the ESP initiative
have made the need for a cognitive learning lab even more
compelling.\71\ In-depth research on how taxpayers learn and respond to
communications would provide the IRS with important tools to enable it
to educate taxpayers and increase responsiveness more effectively. The
IRS could use the information gained from the cognitive lab to better
tailor outreach strategies for unexpected events to meet the diverse
needs of the tax population. We do not need to wait for a disaster or
an unexpected initiative to learn about our diverse taxpayer base, nor
should we. The IRS needs to go beyond mere demographics and begin to
develop a more comprehensive understanding of its taxpayers now.
---------------------------------------------------------------------------
\71\ See National Taxpayer Advocate 2007 Annual Report to Congress
156-161 (Most Serious Problem: Taxpayer Service and Behavioral
Research) and vol. 2, at 158-167 (Research Report: Normative and
Cognitive Aspects of Tax Compliance: Literature Review and
Recommendations for the IRS Regarding Individual Taxpayers).
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Chairman LEWIS. Thank you, Ms. Olson, for your statement.
At this time, I will open the first panel for question. I ask
that each Member follow the 5-minute rule.
Ms. OLSON. I am submitting, for the record, two letters to
the Subcommittee from the Federal Trade Commission and the FBI.
These letters state that almost 300 identity theft complaints
have been filed, related to the rebate checks.
[Letter from the Federal Trade Commission follows:]
[WAITING FOR RESPONSE FROM COMMITTEE]
[Letter from the FBI follows:]
[GRAPHIC] [TIFF OMITTED] 50038A.001
[GRAPHIC] [TIFF OMITTED] 50038A.002
Chairman LEWIS. Have you seen any identity theft problems
related to the rebate checks, or is there a form at IRS for
taxpayers to report identity theft?
Ms. OLSON. To date, the IRS has reported to us that they
have only identified 25 cases dealing with identity theft and
the economic stimulus payment itself.
However, an informal survey in my own offices, just asking
my local taxpayer advocates, they said that they had 13 such
cases. So, either we have half of all IRS cases, or there are
many more cases out there. We usually get 1 percent of problems
that the IRS sees, as a whole.
There is no form, presently, for taxpayers to report
themselves an identity theft victim. I am concerned how the IRS
is counting these cases of identity theft, because as of this
point they have not yet implemented the marker on accounts
where the IRS can know that there is an identity theft
situation with respect to a taxpayer.
Chairman LEWIS. Ms. Olson, what is the estimate cost to
date of the rebate check?
Ms. OLSON. I honestly do not know that number. Perhaps GAO
could better answer that.
Chairman LEWIS. Is Mr. White, from GAO, here today? If so,
please come forward.
Mr. White, could you tell Members of the Committee, what is
the cost today of the rebate checks? How much of this is
foregone revenue from shifting employees?
Mr. WHITE. Yes, Mr. Chairman. There are three components to
the cost of the rebate program that we have identified. The
first is sup0plemental appropriations. IRS got a supplemental
appropriation of $202 million; Social Security got a
supplemental of $31 million; and Treasury's financial
management service got a supplemental of $64 million. So, there
is a total of $297 million in supplementals.
The largest element of cost is the foregone revenue that
Ms. Olson just described. IRS estimates that the foregone
revenue from shifting collections staff from doing collections
work to answering stimulus-related telephone calls to be up to
$565 million. So, that brings the total dollar cost--the
supplementals plus that foregone collections revenue--to $862
million.
Then, there is a third component to the cost, and that is
the burden on taxpayers of getting answers to questions about
the stimulus program. Taxpayers are having to wait longer on
the phones to get through, to get answers to those questions,
and we can't quantify that in dollars, but that's a very real
cost to taxpayers, as well.
Chairman LEWIS. Now, for the two of you, do you expect the
call volume to remain high through the next filing season?
Ms. OLSON. The IRS estimates, just through the end--until
October 15th, of them getting only about another 6 million
calls, which I find a rather low-ball number. I think we may
get six million calls in July. I do think, because there will
be confusion from people who need to claim some more of the
payment on their 2008 returns, that we will continue to get
calls.
We may see confusion of people who received their credit,
claiming the credit again on their 2008 returns, because my
understanding is there will be a line on those returns. So, I
look forward to lots more confusion ahead.
Chairman LEWIS. Mr. White?
Mr. WHITE. Yes. Tax--individuals who are not taxpayers, who
did not have a tax filing requirement, have until October 15th
to file this year in order to claim the stimulus. So, for that
reason, there may be more calls.
Chairman LEWIS. Thank you. Now I turn to Ranking Member
Ramstad for his questions.
Mr. RAMSTAD. Thank you, Mr. Chairman. Thank you, Ms. Olson,
for your testimony and for your articulate advocacy on behalf
of taxpayers.
Also, as a Member of this panel which has oversight
jurisdiction regarding the IRS, I appreciate hearing your
summary statement that the IRS, on balance, has done an
outstanding job of administering both the 2008 filing season
and the Economic Stimulus Act. It's always refreshing to hear
when an agency of the Federal Government does a good job.
I just have two follow-up questions--that is, follow-up
questions to those asked by the distinguished Chairman--the
first one regarding the diversion of collections staff.
In your opinion, would it have been possible--hindsight is
always 20/20, and I think we sometimes even learn from it, or
at least we should--do you think it would have been possible
for the Service to hire additional temporary workers to handle
phone inquiries about the stimulus checks? Was that not done
because of lack of funding, lack of time, or perhaps a
combination thereof?
Ms. OLSON. I think it is a combination thereof. The IRS did
hold over its temporary workers that it had for its filing
season, that it normally hires in the filing season, to deal
with the stimulus payments, since they were, we thought, going
to--the busy season was going to be after the filing season.
Perhaps what really took us by surprise was the number of
calls coming in during the filing season, and the mailings were
an attempt to try to say, ``Don't call.'' But people called
anyway.
I think it's hard for us, in the middle of a new
initiative, to staff up, train, go through background checks.
That's just a virtual impossibility. One thing I've thought is
that if we're going to continue to get these programs given to
us, that we may need to really think about creating just a
cadre, whether they're seasonal workers, they're on-call
workers, to deal with disasters, programs that Congress gives
to us, all of those things--and I'm not equating disasters with
programs Congress gives us.
Mr. RAMSTAD. That was my next question.
[Laughter.]
Mr. RAMSTAD. Well, thank you, Ms. Olson. My final question,
I share the concern I'm sure everybody does, with the Chairman
about identity theft. Are there any additional steps that you
believe could be taken to prevent scam artists from using the
stimulus payments as a way to steal the identities of
taxpayers?
Ms. OLSON. I think that the outreach on that really needs
to be local, and I think the IRS has done well with this, and
we just need to do more of it.
When we work through trusted partners in the communities,
you know, come to this non-profit, come to the walk-in site,
come to our Super Saturday, where you have trusted people
there, then you minimize the risk of identity theft from scam
artists, because people have an alternative place to go.
It's when we're trying to deliver it on a national level,
you know, file your own return, and we don't have a local
presence, then it provides an opportunity for these scam
artists, through lots of different ways, to move into that
local presence, and victimize folks, and particularly the
elderly population. We really would have problems there. So,
going through their partners is absolutely vital.
Mr. RAMSTAD. Well, I certainly appreciate your view. Those
caveats, I think, are very, very important, and, as you say,
especially to avoid our senior citizens from being victimized,
who are disproportionately victimized by these--well, I won't
use the word in a public hearing, but those scam artists. Thank
you again, Ms. Olson. I yield back.
Chairman LEWIS. Now I turn to Chairman McNulty for his
questions.
Mr. MCNULTY. Thank you, Mr. Chairman. I don't really have a
question. I have an observation I want to make, and it relates
to something you said at the end of your testimony.
But, first of all, I want to thank you on your tremendous
good work on behalf of taxpayers all across the country. I am
generally in an attitude of gratitude today to all of the
agencies involved, because I think our government workers have
done an extraordinary job under very difficult circumstances in
a very compact timeframe. So, I thank you all.
You made a suggestion toward the end of your testimony
about possibly having the SSA send out these checks. I just
want to tell you very directly I think that's a terrible idea.
I have spoken in the last few days to both of the commissioners
are IRS and SSA, and they do not believe that is either
necessary or in the best interest of the process. From--and I
agree with them, wholeheartedly.
You may or may not be aware of the fact that we have worked
very, very hard in the last couple of years to help SSA deal
with this tremendous backlog on disability claims, which is the
result of under-funding for years and years, for which there is
plenty of blame to go around; I'm not blaming anybody in
particular. But that's just the way it is.
We have--we had a good increase in the budget last year.
According to the budget resolution this year, we will have even
more. We put out a new ALJ list, we are in the process of
hiring more than 175 new administrative law judges. We are
making progress. The last thing we need to do at this point in
time is impede that progress.
The estimates that have been given to me would be that if
we were to implement the suggestion that you made at the end of
your testimony, it would take six to 8 months just to get the
proper list together in order to get those checks out. That's
the last thing we need to do, is further delay this process.
So, I just want to put you on notice that certainly if I have
anything to say about it, that's not going to happen.
What should happen--because this, as I said in the
beginning, this process has been largely successful, and I
think we're kind of in the home stretch on this, now, to kind
of wrap it up--and I think basically what we need is a good
dissemination of information and education about what we need
to get to the affected population, so that they get their
stimulus checks.
I want you to know we're going to help you with that,
because the four people right in the middle here that you're
looking at, we're going to get a communication out to all of
our colleagues, every single Member of the House, about getting
the word out about the steps that they need to take all across
the country in all these individual districts to get the
stimulus check to which they're entitled.
So, as I will when the commissioners appear, I want to
thank all of you for the tremendous work you have done. The
last part of your testimony is a bad idea, and is counter-
productive, and I just want to let you know my feelings on
that.
Ms. OLSON. Well, I hear your feelings. I can also say that,
as a mother of a disabled son, I have navigated the disability
process, so have some familiarity with that backlog. My
suggestions go to that population. What I have tried to think
about, in response to being asked to think about that, were
alternatives, because the IRS itself also suffers from this
additional workload, as I have outlined in my testimony, and
taxpayers are harmed by the IRS diverting its resources on
systems that are making the tax system easier into programs
such as this.
So, I have tried to think about ways that would lessen the
burden on the IRS without placing so much burden on other
agencies.
One of the thoughts that I had, because they seemed to be
able to do this in Puerto Rico and Guam, is to use the
available information that government agencies have working
together, to identify those taxpayers entitled to the $300
payment without making them take an affirmative act. I think
that does require more involvement on the part of Social
Security Administration, working with the IRS.
The other thing that I thought----
Mr. MCNULTY. Well, that is a different proposition.
Ms. OLSON. Right.
Mr. MCNULTY. SSA is working with IRS to do----
Ms. OLSON. Yes. The other thing that I thought would be a
positive thing is because SSA, with Treasury's assistance, now
has these debit cards, that we could utilize the debit cards to
get the money faster to SSA recipients. But I also propose that
the IRS implement debit cards. My concern was SSA recipients
having to wait for paper checks.
So, I just wanted to give you some background to where my
comments came from.
Mr. MCNULTY. Right, and----
Ms. OLSON. I hear your concerns.
Mr. MCNULTY. Right. Well, it's not just a concern, it's a
reality that would actually--when we're trying to speed up the
process, that proposal would delay the process.
I just hope you keep in mind also the comments of Chairman
Lewis at the beginning: if IRS needs additional resources
toward the end of this process, we want to know about that, and
we want to help with regard to that. I thank you again for your
testimony.
Ms. OLSON. Thank you.
Chairman LEWIS. Now I turn to Ranking Member Johnson for
his questions.
Mr. JOHNSON. Thank you, Mr. Chairman. I'd just like to say
that I hope the IRS will continue to examine the issue of
identity theft, and take some more positive steps in that
direction. I will yield back my time; no further questions.
Chairman LEWIS. Thank you, Mr. Johnson.
Mr. JOHNSON. Thank you, Sir.
Chairman LEWIS. Thank you----
Ms. OLSON. May I comment on identity theft a little bit,
briefly?
The IRS--the commissioner has dedicated a lot of resources,
since he came in, to working on this issue. There are multiple
teams, and my organization is also involved with this. I think
you will see some improvements over the next year. It's just
that right now we're not there yet, and we have this program.
So, I think you're seeing some problems, because we don't have
the solutions in place yet. But we are working on it.
Mr. JOHNSON. Thank you.
Chairman LEWIS. Thank you. Now I recognize Mr. Doggett for
his questioning.
Mr. DOGGETT. Thank you very much, Mr. Chairman, and thank
you for the testimony you both offered.
Ms. OLSON. you indicated that less than 100 percent of the
people who are entitled to receive this stimulus payment will
receive it. What is the best estimate of how many people will
not get the stimulus that they're entitled to?
Ms. OLSON. Oh, I think that is--I don't know that I have
that best estimate. We do--we have identified 20.5 million
taxpayers, or individuals, that didn't file 2006 returns. Some
of those--we've gotten in about seven million of those folks,
and the question is maybe some of those other taxpayers,
they're joint returns so we may really get more than seven
million--you know, these are seven million returns.
It's hard to know how many others are out there that
don't--have too low income. They're not on Social Security
rolls, they're not on Veterans rolls. It's a very difficult
number to estimate.
Mr. DOGGETT. Do you know if there are internal estimates
within the IRS, or whether----
Ms. OLSON. Well, it's the----
Mr. DOGGETT [continuing]. GAO has done anything on it of--
--
Ms. OLSON. It's--the 25 million is what people are working
off of, with a recognition that there are other pockets of
taxpayers that we just can't quantify.
Mr. DOGGETT. Do you have any insight on that, Mr. White?
Mr. WHITE. We don't have a separate estimate of our own. I
agree with Ms. Olson. IRS initially estimated something over 20
million. They're not sure whether it's going to be that many or
not. The problem here is the difficulty of trying to estimate
the number in that group.
Mr. DOGGETT. While I clearly am very concerned that all
those who are entitled to this stimulus payment get it, I note,
as Mr. Johnson pointed out, that we have spent $300 million to
ensure that it gets done right.
I am also concerned about whether any of these payments are
sent out to people that are not entitled to receive them. Are
either of you involved on that end of it, to be sure that the
stimulus payments only go to those who are entitled to receive
them?
Ms. OLSON. Well, I think that the--actually, the way that
the legislation has been written is pretty tight, as----
Mr. DOGGETT. Well, let me tell you where it apparently
wasn't tight enough.
Ms. OLSON. Yes, Sir.
Mr. DOGGETT. Yesterday I received a notice dated June 16th
that my mother would receive her payment next week. My mother
died last September. Within a week of her death, because her
payments are direct-deposited into her account, I notified
Social Security, to be sure that we wouldn't have any payment
to which we were not entitled.
Do you have any estimates? I extend this question--I may
not be able to stay for all their testimony--to the next panel,
as well. Do you have any estimate of how many dead people are
receiving stimulus payments?
Ms. OLSON. Sir, I don't. There is a question on the website
that I will go back and look at that talks about decedents, and
who is entitled to that payment in the course of the decedent,
because it would be--the payment is based on their 2007 filing.
So she filed, or her--you know, her estate filed----
Mr. DOGGETT. Her estate filed----
Ms. OLSON [continuing]. A return for her. Perhaps under the
law, she is entitled to it, and I would have to check----
Mr. DOGGETT. Well, I would like to know about that, too.
Ms. OLSON. Yes.
Mr. DOGGETT. If, as a part of the stimulus--in her case,
she does not have a surviving spouse--whether this payment goes
to estates of people this year or not, and what efforts--it
surprises me that there has not been any update, if there has
not, of the database to reflect that. Do you know----
Ms. OLSON. I will check on that.
Mr. DOGGETT. Do you know, Mr. White, if under this payments
can be made to the estate if there is no surviving spouse of
someone who died last year?
Mr. WHITE. I am not sure, off the top of my head. I--given
the short period of time that IRS has had to implement the
program, I don't think yet there are good estimates of non-
compliance problems. We are monitoring this as part of our
filing season work for the Subcommittee on Oversight, and we
will be reporting later this year.
Mr. DOGGETT. Well, it's been right at 9 months since I
notified Social Security of this. You would certainly expect
that they would have updated the database to show the correct
information.
Fortunately, they have not been sending, to my knowledge,
any direct deposit of her Social Security check. You would
expect that they would have it all--all the database--corrected
in 9 months, wouldn't you?
Mr. WHITE. We are--this is something we are monitoring, and
we will pursue as part of our ongoing work for the
Subcommittee.
Mr. DOGGETT. Thank you very much.
Chairman LEWIS. Thank you. Now Mr. Brady is recognized for
his questions.
Mr. BRADY. First, let me thank Chairman Lewis and Chairman
McNulty, Mr. Ramstad, and Mr. Johnson for hosting this hearing.
I think it's important to do this.
Our caseworkers, for whatever it's worth, our caseworkers
back in Texas have experienced few complaints about the help
line. In fact, we've gotten calls back from those we've
referred, where they have been satisfied with the results. I
don't know if that will continue, but that's our experience
back home.
The question today deals with the technical aspects of
delivery. But I think the bigger question on the stimulus
checks is, is it working. Are these checks stimulating our
economy across this country, as was hoped? I think the answer
is no, or certainly not as much as it could. There is reason
for that.
In the past year, rising fuel prices have, I believe,
neutralized the impact of the stimulus checks. Just in the past
year, the average family in America is now paying $536.50 more
for fuel than they were a year ago. It is hard to have--with
$300 to $600 stimulus checks, it's clear that these checks are
being drained down our gas tanks. The impact is being
neutralized, because families are not buying a new computer, or
a washer and dryer or a TV set when they can't afford gas for
their family van.
It's frustrating that this Congress has failed to act to
lower fuel prices in America. We have, unfortunately, found
time in the past few weeks to pass legislation through the
House to protect exotic cats and dogs in foreign countries. We
found time to celebrate the International Year of Sanitation.
This week we found time to prevent monkeys from crossing state
lines. But we have not found time to take the actions to lower
fuel prices for American workers.
That cost of $536 more is even higher if you live in a
rural community, which much of America does. It just seems to
me both Republicans and Democrats together have to find a way
to unlock our resources here in America to produce more
American-made energy, to take more responsibility for the daily
energy needs. Because being dependent on foreign countries for
nearly two-thirds now of our daily energy needs is costing us
at the pump, and it's robbing the impact of these stimulus
checks.
Ms. Olson, I won't ask you that question, the impact.
Ms. OLSON. Thank you.
Mr. BRADY. I will say, though, you have raised a separate
issue from that, which I feel we ought to be exploring. That's
the issue of debit cards. Seems to me we need a--as much as we
can--more of a 21st century response to challenges, short-term
challenges, like this.
Can you comment on how those would occur, and who would be
eligible to get them?
Ms. OLSON. Well, I do think I have to say the IRS is
exploring the idea of delivering regular refunds on debit cards
as Social Security has started to use debit cards for those
individuals who don't have bank accounts. There are savings to
the government in that regard, so that you don't have to issue
paper checks.
A debit card has an account number and a routing number,
just the same way as a bank account does. I think my
understanding is, with Social Security, that Treasury has
entered into a contract with one entity to deliver these cards.
It's no fee to the individual receiving the card. It can be
done in any number of ways: people going into banks and picking
up a card, or being assigned a card themselves.
So, I think that, you know, the--that would just--for those
individuals who are unbanked, or even in the area where we're
sending out paper checks, the delivery of dollars is so much
faster if we're delivering it electronically.
Mr. BRADY. Yes.
Ms. OLSON. The debit cards are just really, to me, as you
said, a 21st century solution.
Mr. BRADY. Those debit cards, since people are struggling
so much with high fuel prices, you know, if they weren't able
to afford something they needed, but instead had to buy higher
gas, would they be eligible to use it at the gas pump?
Ms. OLSON. Absolutely. The Social Security cards are used
anywhere that essentially a credit card is taken. So, at food
stores, at gas tanks, at ATMs, et cetera.
Mr. BRADY. All right. Thank you, Chairman. Yield back.
Ms. OLSON. Mr. Chairman, may I answer Congressman Doggett's
question? I found----
Chairman LEWIS. Yes, you may, Ms. Olson.
Ms. OLSON. Thank you. There is a FAQ on the IRS website
that says, ``If an individual dies, what happens to his or her
direct deposit, or stimulus check?'' The answer is, ``Stimulus
payments will be issued in the name of the individual eligible
for a payment on a filed 2007 income tax return, or to the
account designated by the individual on that return. This
includes situations where a person dies after filing a return,
or where the final 2007 income tax return was filed by a
personal representative or surviving spouse.''
``Any issues or concerns involving a decedent's filed
return, or the related stimulus payment, should be addressed by
the legal representative of the decedent's estate.'' So----
Chairman LEWIS. Now I turn to Mr. Pascrell for his
questions.
Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, with
all due respect to my good friend from Texas, the last thing
that these Members need is another lecture on drilling. But I
am sure that will not be the last one.
You know, if you're respectful of the Members, if you're
respectful of the Members, then you bring to folks' attention
the high cost of everything, not just gasoline.
Second of all, this is not germane to the topic, not at
all.
Mr. BRADY. Will the gentleman yield?
Mr. PASCRELL. Sure.
Mr. BRADY. One, Bill, I think you're wonderful, and I
appreciate your leadership, but I do think fuel prices are
germane to this discussion on stimulus checks. Not only are
fuel prices up, but food prices, because we have not dealt with
this fuel issue. That is driving a good amount of food prices,
cost increases, as well.
So, while it is important to folks on the technical side, I
think most of America is struggling, and needs some help that
way. That is the only reason I point this out, because I think
that's the bigger picture we ought to be looking at. I yield
back, I apologize.
Mr. PASCRELL. Yes, thank you, Mr. Brady. The gas prices
didn't just go up the last 6 months or the last year. Gas
prices have been going up since 2001. You know they've
increased 270 percent.
Mr. BRADY. Yes, 170 of that----
Mr. PASCRELL. It didn't just happen, and----
Mr. BRADY [continuing]. In the past year.
Mr. PASCRELL. So, to create the impression, which is in
your talking points--not you, but your party's talking points--
that this is going to be we're going to be saddled with this,
has nothing to do with the questions we should be asking Ms.
Olson. I don't think so. Maybe--am I out of order? Tell me. But
I don't think it has anything to do with the price of tomatoes.
I am concerned about this number: 3,776,147 people over the
age of 65 remain to file for the checks under SSA and VA. In
New Jersey, it's 108,803, 69 percent. I would like to know, Ms.
Olson, what are you doing about it?
Ms. OLSON. Well, the IRS is mailing to those individuals
that we've been able to identify, through the help with Social
Security and Veterans Administration, a second mailing, asking
them to come in and file, and providing to them the return that
they need to fill out in order to get this payment.
The IRS is continuing, through its walk-in sites, to--
located throughout the United States--to prepare these ESP-only
returns for free for taxpayers, if they can come in. They are
continuing to work with their non-profit partners to have
initiatives that go out, as are my employees.
I think that there are--as I outlined in my testimony--some
natural barriers to getting some of these folks who have not
had any trafficking with the IRS for several years to want to
file a return again, which led to my recommendation for future
efforts, that we try to come up with a way where we can
automatically get this money to them, without them having to
file a return. Because I think, with some of this population,
that's too difficult.
Mr. PASCRELL. I mean, no other demographic group is even
close to this group. You would agree to that, right?
Ms. OLSON. Oh, when we----
Mr. PASCRELL. I mean, the next group is like 13 percent.
Ms. OLSON. When we know, particularly with the--since we're
basing the information on who has filed a return the previous
year, we have a lot of information on those populations, and
we're basing it off of their 2007 return.
Mr. PASCRELL. Well, what can we learn from the Treasury
Department's inability to communicate to EITC recipients, for
instance--if I could draw a parallel here--and you know the
millions and millions and billions of dollars that are
unclaimed with those who are the working poor, which we are
dedicated to, I'm sure both sides of this aisle. Have we
learned anything from their shortcomings?
Ms. OLSON. Well, the IRS actually does a very good job--
I've spent my life around the earned income tax credit. What is
interesting in those numbers is that we have a very high
participation rate among families with children.
Where we have a very low participation rate is the EITC
that goes to the non--you know, the worker that doesn't have a
child, which, to some extent, is in this other population for
the Social Security--I mean the economic stimulus payment: low-
income workers that maybe don't have enough income to file an
income tax return.
Mr. PASCRELL. Right.
Ms. OLSON. I think they're both very difficult populations
to get to. They don't necessarily have Internet access. If they
have access, they don't necessarily have Internet literacy to
do the kinds of things that you might need to do to file a
return.
Again, as I said earlier, I think that the IRS sometimes is
not really the best--the entity to communicate that. I mean,
after all, we are an enforcement agency, on top of everything
else. So, that's why we have to really work with our partners,
whether it's the states and state agencies, or congressional
offices, or non-profits in the community that, for other
reasons, are reaching out to these populations.
Mr. PASCRELL. If we're passing legislation, Mr. Chairman,
to help those who need this most, and for those who are older,
like myself, and those who become incommunicable, this is a
very difficult situation which I don't see any--I'm not in a
comfort state right now----
Ms. OLSON. Right.
Mr. PASCRELL [continuing]. To know that we're getting to
this public, and yet this is a lot of money we're talking about
here.
Ms. OLSON. Right, right.
Mr. PASCRELL. To people who greatly need it. We have not--
you know, we're state of the art--improved the state of the art
to get to these people. I think that this is a very, very
difficult--I would like to know, from the IRS, what they're
going to do to address the most glaring problem here: 69
percent in New Jersey, 67 percent across America. The next
demographic group is 13 percent, and that's over 50, or 55, if
I'm not mistaken.
So, I don't know what you're going to do, but I would like
to sure as heck know about that, and I'm sure everybody on this
panel would like to know. Thank you, Mr. Chairman.
Chairman LEWIS. Mr. Pascrell, I want to thank you for
drawing attention to the number of people in New Jersey who
have not filed.
I noticed in the State of Georgia more than 167,000 have
not filed. I want to thank you for bringing it to our
attention.
Now I recognize Mr. Tiberi for questioning.
Mr. TIBERI. Thank you, Mr. Chairman. Thank you to you and
to the other Chairman and to the Ranking Members for holding
this hearing today.
I agree with what Mr. Ramstad said, that 95, 96, 99 percent
of what you are doing and what the IRS is doing is great.
Let me tell you about something that I think is not so
great, and get your thoughts on it. In your testimony, you
acknowledge that the IRS did not make sufficiently clear that
returns had to be processed by April 15th to be followed
through to the schedule that's been posted, in terms of when
people are going to get refunds.
We have had probably between 50 and 60 individuals contact
our local office, wondering what happened to their return.
They're mostly seniors, they're mostly people who filed to get
a paper refund, not an electronic transfer refund. Most of them
we find out have filed close to or on April 15th. We didn't
know, they didn't know, that they would be impacted by the date
that they filed. So, there has been a lack of communication.
Most of them have been resolved with going to the website
and getting the new date. Not all of them have. In fact,
Congressman La Tourette, also from Ohio, his office was told
last week by an IRS official that, in fact, some of these
people may not even get a rebate check because they may have
filed wrong, which is a bizarre statement, in and of itself.
One taxpayer I talked to Monday night, who was supposed to
get a refund or a check on May 12th has been told--hasn't got
any answers from the IRS, has been told by your office in Ohio,
``Keep checking back with us on a weekly basis.''
So, his question to me was, ``Who do I call when I can't
get help with the advocate's office, and I can't get help with
the IRS?'' That person happens to be my dad, who is pretty
frustrated right now. He is not the only one. So, what do we
tell our constituents who aren't getting any answers, who filed
properly, and filed within the designated time that we all in
Congress said you need to file b.
Ms. OLSON. You have really highlighted a number of the
issues that I have also tried to highlight in my testimony, the
first being it's very difficult when you're trying to get a
broad message out. ``We are going to get this payment to you.
It is up to $600, $1,200, whatever,'' and then there are all
these exceptions to the rules. ``File by April 15th,'' you
know, but then we don't say, ``But you actually have to do it
before, so we can process it by April 15th, so we can be on
this schedule.'' Those are hard messages to get out.
I have been told that the website only can give information
about the status of your payment if it is 2 weeks, within 2
weeks it's going to be issued. So, if you didn't file in order
to be processed by April 15th, you're down there in the
processing line, and your information may not be on the
website. The website will say, ``No information at this time.''
Mr. TIBERI. That's right.
Ms. OLSON. When you call my employees, they are frustrated
because they have no ability, unlike regular refund checks, to
do a--cut a manual check, process your father's or any other
taxpayer's account that has some kind of hardship need out of
cycle, and get the payment to you. That is something we are not
able to do with these economic stimulus payments, which is very
frustrating for my employees, and obviously, for the taxpayers.
So, all they can do is keep checking, themselves, the
systems weekly to see when has your father's--or any
taxpayer's--check posted to go out. We do not have the tools to
expedite those payments.
Mr. TIBERI. Do you have suggestions on how maybe the IRS
can be helpful?
Ms. OLSON. They are bound in the same way that we are. You
know, I think that if the IRS had had more time, they could
have programmed and, you know, maybe enabled us to be able to
do manual checks, so that we could have overridden some
systems. If we had had more time, we may have been able to
program a better website that could give more information
further on down the line, as far as estimates of what payments
can come.
But I think if you called any number at the IRS, if the
payment isn't scheduled, everyone is going to give you the same
answer.
Mr. TIBERI. Have you heard what Mr. La Tourette's office
was told by an IRS employee?
Ms. OLSON. No. Do I want to?
Mr. TIBERI. That if you filed incorrectly, that you may not
get a stimulus check?
Ms. OLSON. Oh. That surprises me. Again, that would be the
thing that I would say that taxpayer needs to come to the
Taxpayer Advocate Service, so that we can track down why--what
the information was.
I do know that we are getting some returns, duplicate
returns, where a taxpayer--and this goes to the elderly
population--which we saw this with taxpayers, they went to the
VITA site, and they filed a 1040 on white paper. Then they got
a mailing from us, where we had put the 1040 on pink paper,
because we wanted them to see it, and they thought, well, now
they need to send another one in, because they send a white one
in first, so now they need to send a pink one in.
If we get two of those returns, it's going to take some
time. But we will resolve that issue. But it will delay the
payment of the check, you know, the payout.
So, there are a lot of different things that may have
happened, but that's where maybe Taxpayer Advocate Service can
be helpful, in tracking down----
Mr. TIBERI. Okay.
Ms. OLSON [continuing]. What the problem is, and fixing it.
Mr. TIBERI. Thank you. Thank you, Mr. Chairman.
Chairman LEWIS. I just want to remind Members that if you
can, limit the question to 5 minutes so all Members will have
an opportunity to get their questioning in. Mr. Pomeroy is now
recognized.
Mr. POMEROY. Mr. Chairman, I note you make that admonition
as I begin to inquire. Is that----
Chairman LEWIS. Oh, no, I didn't mean that. It was not for
you, Mr. Pomeroy. You know I would never do that to you.
Mr. POMEROY. A couple of compliments to start the inquiry
period. I have been very impressed with the new commissioner,
Douglas Shulman, appreciate the IRS provided information about
the take-up rate, especially with seniors, on the--or the SSA/
VA population that has filed.
I also appreciate, once again, Ms. Olson and her leadership
with the taxpayer advocacy office. I really do think that you
play a very constructive role in improving the system, and
advocating for taxpayers, just what Congress thought as they
created our position. Congratulations on good work, once again.
I notice that the IRS anticipated 6.8--it anticipated 14.5
million ESP-only returns would be filed. Based on our staff's
research as of May 31st, 6.8 million ESP-only returns filed.
The IRS estimates in a letter from the commissioner that there
is 5 million seniors in the SSA/VA population that have yet to
file.
The break-out by states is really quite something. In North
Dakota, it looks like remaining to file is 75 percent of its
population age 65 and over. The numbers by state, also
alarming: Ohio, 226,000; Wisconsin, 77,000; Michigan, 154,000;
Massachusetts, 151,000. I mean, this goes on and one.
I, by the way, will add this list to the record. I think it
shows that we have work to do. I think that the IRS, SSA,
Members of Congress, allied groups, getting the word out they
can still file and get this information is extremely important.
[The information follows:]
COMMITTEE INSERT
Mr. POMEROY. I take general issue with my Social Security
Chairman, relative to whether or not this is any business of
SSA. I think when you get take-up rates falling so far short of
the universe of eligible for stimulus, we need to be pretty
open-minded about how we can make these systems work better.
I certainly am one, as a senior Member on the Subcommittee
on Social Security, open to any suggestions in this regard,
including a greater role of SSA, provided, of course, it
doesn't detract in any way--and I think this is the Chairman's
concern--from their foremost mission. We would have to staff
it, we would have to build systems that allow them to do it
without interruption of the important work they do getting out
these Social Security checks and reducing the backlog on
disability determinations.
Okay. On a portion of your testimony that has not been
mentioned today involves the very unfortunately interaction
with refund anticipation loans and the stimulus check. You
know, I think refund anticipation loans are pretty much
worthless. I would probably vote against them. I certainly have
been concerned about our free-file alliance partners using
relationships with the IRS to market what I think is an
extraordinarily poor value to taxpayers.
But I don't think anything brings out what poor value this
is quite as much as the interaction on the early return, and
let's talk about that for a minute.
If I understand your testimony correctly, the way a RAL
works is a temporary account is established, for the purpose of
deposit to the account. So, for the almost 10 million taxpayers
who purchased refund anticipation loans and 10.5 million who
purchased refund anticipation checks, each of them had these
special accounts created, and that was related to their filing.
Am I correct so far?
Ms. OLSON. Yes.
Mr. POMEROY. Now, this account goes away when they get
their refund anticipation check. So, it's not an account the
IRS can use for an electronic deposit.
Ms. OLSON. Correct.
Mr. POMEROY. So, the only way anyone who got a refund
anticipation loan gets a stimulus check is by a paper check
mailed out.
Ms. OLSON. By a paper check, that's correct.
Mr. POMEROY. So, let me just put this straight. Some of
these people going to--some taxpayers, like millions, going to
tax preparers that are hawking not just tax preparation
services, but these side products like refund anticipation
loans, knew at the time they were selling the refund
anticipation loan to the taxpayer, that it would cause a two to
two-and-a-half month delay in their receipt of the stimulus
check?
Ms. OLSON. In the--since the law was enacted in February,
we would have known very quickly that we wouldn't be able--they
wouldn't be getting a direct deposit.
Mr. POMEROY. That's right.
Ms. OLSON. They would be getting a check, yes.
Mr. POMEROY. Let's face it, the bulk of the--the bulk of
taxpayer business is, let's say, March 15th to April 15th.
Ms. OLSON. After the first wave, after the January 15th to
February. We would have missed the first wave.
Mr. POMEROY. Missed the first wave, but this last wave,
which is substantial----
Ms. OLSON. Right.
Mr. POMEROY. I will try and hurry, Mr. Chairman. The last
wave, which is very substantial----
Ms. OLSON. Yes.
Mr. POMEROY [continuing]. Comes in to a tax preparer. They
are so desperately in need of cash, they're taking a poor value
RAL. The person selling the RAL knows, you know, ``Okay, we
will get you money right away on your tax return,'' and what
they fail to tell them, I expect, in each and every instance
was it would cause a two-and-a-half month delay in receipt of
the economic stimulus check.
Ms. OLSON. That's the effect.
Mr. POMEROY. So, they paid good money to get their refund
early, or their refund immediately, only to lose two-and-a-half
months in access to the economic stimulus check.
In my opinion, tax preparers have a relationship with the
taxpayer. That includes a fiduciary responsibility, or
something like it, in my own mind. Maybe I am being naive about
representing the best interests of the taxpayer that is
entrusting them to prepare the return. Not providing
information that they're going to delay receipt of the stimulus
check by two-and-a-half months when they purchase at high
value, relative to the refund, these refund anticipation loans
in my opinion, it's very, very shoddy work by this industry,
and they include some of the best known tax prepares in our
country.
Ten million taxpayers on refund anticipation loans, another
ten million on refund anticipation checks. That's 20 million
people, or 20 million filers are going to be delayed in getting
their stimulus check because it took refund anticipation loans.
That is one sorry statement on what I think is a very
insufficient industry. I yield back.
Chairman LEWIS. The gentlewoman from Pennsylvania is now
recognized for her questioning.
Ms. SCHWARTZ. Thank you, Mr. Chairman, and I appreciate
this. I also want to start out by saying that I think a lot of
good work has gone on, and on all of our behalf, to get this
information out to tax filers, particularly to seniors.
In my own office--and I personally went to a number of
senior centers and retirement communities, and I got great
cooperation from the IRS, they sent someone out with forms. My
own experience in doing this is that there were a lot of people
who were concerned about--just as you pointed out--about filing
a form with the IRS they had not had any relationship with for
a while. My sense was that some of them were ready to do it,
and some of them were not. That really speaks to a need to do
this in a somewhat different way.
To say to people, ``You need to fill out this form. It's a
different color, you've never done it, you won't have to pay
any income taxes, don't worry about it, the IRS isn't coming
after you'' is not something that, you know, a lot of Americans
would take to, and particularly--and I'm interested--you know,
when you see all the numbers broken down by 65 and older.
My question at this point is are they really the 80-year-
old and older who are not filing this form, that were more
concerned about it, their skills, their ability to do that?
Certainly the discussion about use of the computer, just go on
the website--I want you to know my mother-in-law is a really
active 82-year-old, and she is--hates a computer.
Ms. OLSON. Yes.
Ms. SCHWARTZ. You know, and she hates those automatic dial
things, too. You know, she wants to talk to a real person.
But--and even suggesting that they should just come in to
an IRS center is completely--just not realistic, not at all
realistic.
So, the question I have is what do we do, going forward,
how do we actually really make it easier. I heard what you were
saying earlier, about the possibility of some more automatic
data transfer. Of course, even having seniors over 70 or 80 or
85, maybe even 90 say, ``Oh, just make it debit card,'' you
know, there are a lot of older folks who don't believe in debit
cards. They think that that's kind of the way we've gotten into
trouble in this country----
Ms. OLSON. Right.
Ms. SCHWARTZ [continuing]. Too many young people living off
of debit cards, maybe.
Ms. OLSON. Right.
Ms. SCHWARTZ. But--and credit cards. So, really, the issue
for me is how can we streamline this process now? We have spent
$300 million to get this information out. We still have, in
some cases in Pennsylvania, 25 percent of the seniors eligible
not yet having received it. They only have until October 15th
to file. They're probably going to be not just that much
clearer about it, going forward.
So, I really want you to answer how----
Ms. OLSON. Right.
Ms. SCHWARTZ [continuing]. A little more specifically----
Ms. OLSON. Right, right.
Ms. SCHWARTZ [continuing]. How we can have these agencies
work more----
Ms. OLSON. Right, right.
Ms. SCHWARTZ [continuing]. Cooperatively. They've been
working cooperatively; I'm not looking to say----
Ms. OLSON. Right, right.
Ms. SCHWARTZ [continuing]. What they have done is not
acceptable.
Ms. OLSON. Right.
Ms. SCHWARTZ. But it seems to me it's got to be easier to
do a data transfer between the IRS knowing who has actually
filed and who hasn't, who can be reached out to, who can get a
letter, who can't, by an exchange of data. Is that happening?
What other kinds of outreach efforts are going into, very
specifically, reaching out to what I would suspect are the
really more senior seniors.
Ms. OLSON. Right.
Ms. SCHWARTZ. That's just a suspicion on my part. If that's
not correct, I would like to know it, too. But how can we
actually reach them----
Ms. OLSON. Right.
Ms. SCHWARTZ [continuing]. So that they get the dollars we
anticipated they--and get it soon enough. Because the idea of
this was twofold: to help people who were struggling,
economically; and two, it was to stimulate the economy. This is
next year; that isn't what we meant. We really wanted this to
get out in 3 months.
So, could you speak to those several issues?
Ms. OLSON. Yes.
Ms. SCHWARTZ. It would be very helpful.
Ms. OLSON. The first thing I want to make clear is that I
am not in any way criticizing the cooperation between the
Agency that has occurred to date or the IRS' outreach attempts
to date, because I think they have done an extraordinary job. I
said that in my testimony, and I honestly mean that.
My comments about the--you know, the data exchange, are
really looking at it on a going forward basis. I don't know
whether between now and October 15th, we can take the
population that we know did not file a return in 2006 or 2007,
and our own Social Security's and VA's rolls, and then just
look and see whether any of them got Social Security or VA
benefits, you know, up to--you know, over $3,000, and then just
try to get them a payment somehow, not ask them to file the
return.
Ms. SCHWARTZ. Right.
Ms. OLSON. I think that would require a legislative change.
I was mainly making that point on the basis of going forward
and writing different legislation, if we were to do this again.
Now, that might mean if we can identify those people, those
are the ones that we're targeting for additional, person-to-
person outreach, perhaps, you know, by the IRS, you know, folks
like that.
Now, I do think that the biggest effort that we can make
now between now and October 15th is to work locally, that we
know how many people aren't--haven't filed in each state; we
have some rough numbers of that--and that the IRS--as it has
been doing, but even more so--with the Taxpayer Advocate
Service and with Social Security and with low-income taxpayer
clinics and other non-profit groups, go out to senior citizen
centers----
Ms. SCHWARTZ. Right.
Ms. OLSON [continuing]. Go out to synagogues, churches,
everywhere, and, person to person, you know, reach out to these
folks.
Ms. SCHWARTZ. It's pretty labor intensive. I mean, but
you're saying right now----
Ms. OLSON. It is labor intensive----
Ms. SCHWARTZ [continuing]. The way we passed it, we
prohibited automatic----
Ms. OLSON. Yes.
Ms. SCHWARTZ. Doing that automatically?
Ms. OLSON. But I do think you can leverage----
Ms. SCHWARTZ. I think that is something we should
definitely look at, going forward----
Ms. OLSON [continuing]. Your networks. The IRS knows a lot
of organizations. My employees do 40 grass roots outreaches a
year. If those 40 do a grass roots outreach themselves, you can
really get out there. We just have to keep doing that.
We will never get all of them, though, for all the reasons
I identified in my testimony.
Ms. SCHWARTZ. Again, I would just saying going forward I
believe we ought to look at that. Again, I was not suggesting
that either, you know, SSA or IRS have not done all that they
could. But I think we are just--you know, we still are making
it very labor intensive----
Ms. OLSON. I agree.
Ms. SCHWARTZ [continuing]. Very difficult to reach out to a
not-so-easy population, necessarily----
Ms. OLSON. I agree.
Ms. SCHWARTZ [continuing]. To reach out to. Some of these
numbers--that's not the purpose of this hearing--is that there
are also many people under 65, or not on SSA, who haven't filed
either, or haven't gotten it either.
Ms. OLSON. Yes.
Ms. SCHWARTZ. We know those people, we could write to them.
We could make it simpler.
But, going forward, it seems that we have--we know who
these people are. We have got to figure out a way to reach out
to them and do it more automatically, be able to get, if not
those checks, maybe automatic deposit to them.
So, I appreciate your recommendations going forward, and
some of these questions would apply, I think, to the next panel
as well. Thank you.
Chairman LEWIS. The other gentleman from New York, Mr.
Crowley, is recognized.
Mr. CROWLEY. I thank the Chairman, and thank you. It's also
good to see you again. Welcome back to the Committee.
Ms. OLSON. Thank you.
Mr. CROWLEY. I have appreciated the questions, so far, or
the observations of the panel and your responses, as well.
I have done a good deal of outreach myself to my
constituency in a number of ways, to try to elevate the
attention to the rebate, the stimulus checks.
We have seen from the IRS data that has been presented to
us that in New York State alone, some 440,000 New Yorkers have
yet to file for their rebate check, like veterans retired and
Social Security recipients have not filed for those checks. I
know the outreach that's been done by the IRS, as I say, and
the private, but I would like to know from you, if you could
comment, on what you think has been the most successful and
what has not worked.
Has the AARP mailers been successful, in your view? Will
the Super Saturdays--in my district, in parts of the Bronx, I
know they were holding Super Saturdays to help catch the people
we were hoping that would--they would get a hold of.
What do you recommend that take place, or to help get this
big number? I mean, this is still----
Ms. OLSON. Right, yes. It's a big number, yes.
Mr. CROWLEY. Also, what could we, as Members of Congress--
--
Ms. OLSON. Right, right.
Mr. CROWLEY [continuing]. Be doing to help?
Ms. OLSON. Well, I think that the Super Saturdays were
enormously successful. I think because it was a partnership
with the IRS, with non-profit groups, with the congressional
offices, you know, we really got attention on that, we brought
people in.
I think, if anything, we need to do another Super Saturday.
More importantly, we really need to think about how we bring
this to the individual, because some of these folks are bed-
ridden, not able to get to the site, but they can--they
normally might get to a senior citizen center during the week.
You know, so can we do a Super Saturday or Super Wednesday
at the senior citizens center in a community? I think the
congressional offices can help sponsor some of those events, or
publicize them, and also maybe overcome the concern that some
people may have about the IRS doing it, because it's coming
from the congressional office and it's in a site that the
individual is familiar with, their senior center, you know,
wherever.
I think that that is--the IRS does have employees who work
those issues, and I think they need to just be given free reign
and the funding to be able to do those kinds of events. My own
employees are continuing to do those events throughout--until
October 15th.
I am concerned we do have some of the VITA sites still
open, the volunteer income tax centers, assistance centers, but
there are not very many of them. There are only about 64 or so
that are open between now and October 15th. In New York, for
example, none of them are open in Manhattan or the Bronx, you
know, so you've got this large population and we don't have the
volunteers----
Mr. CROWLEY. So, the poorest populations in the city, as
well.
Ms. OLSON. Yes. I fear that, you know, we really--we need
to give support to these volunteers so that they will stay
open.
Mr. CROWLEY. I say that because 8 out of 10--8 out of the
top 100 zip codes----
Ms. OLSON. Yes.
Mr. CROWLEY [continuing]. Are in part or in whole in my
district in Bronx and Queens.
Ms. OLSON. Yes.
Mr. CROWLEY. So, this is something we really want to
tackle.
If I could just switch gears for a moment--I appreciate
your response, and we're going to continue to work on this, and
I would suggest to my colleagues we all need to look at this in
ways in which we can be helpful, in terms of getting this
message out--if I could just go back to Mr. Pomeroy's question
to some degree, and he talked about a different subject matter,
in terms of abuse.
I just want to bring it back to--and see if you're hearing
some of these same abuses that we're hearing about, and that
includes we've heard reports of some abusive practices by
private tax preparers overcharging, or gouging, on normal non-
filers with high costs to get the rebate, including some
charging some taxpayers up to $200 on a $300 rebate.
What, if anything, can be done to reign these practices, if
they are going on, in? Is there something the IRS can do
through regulation, or we, in Congress, can do through
legislation?
Ms. OLSON. Well, I have--I think there is a multi-pronged
approach to this. One is just the simple outreach that, you
know, ``You shouldn't be paying these fees. Look out for
outrageous fees.''
But I have recommended since 2001 that the--that Congress
pass a bill to regulate return preparation, so that people who
are return preparers are professionals, as opposed to just
simply being in the business to get fees, you know, and sell
products like refund anticipation loans, and things like that,
that there is some professionalism put back into that.
Then, coupled with that, then, the IRS needs to go out and
do these due diligence visits, and look at things that are
disproportionate, in terms of fees. That's a very difficult
issue, but the IRS needs to tackle that head on. I have been
after the IRS for--ever since I've been on this job, and even
before then, to get them to do this.
Mr. CROWLEY. Thank you, Ms. Olson. Thank you, Mr. Chairman.
Chairman LEWIS. The gentlewoman from Ohio is recognized.
Ms. TUBBS JONES. Everything is going off, okay, except
economic stimulus, anyway.
Ms. Olson, talk to me for a moment about your own office,
and your ability to handle the onslaught of work that comes as
a result of these alleged stimulus checks, and the processing.
Ms. OLSON. Well, I can tell you that when people can't get
through on the phone lines because of the level of service and
the number of--the volume of calls that the IRS is just
getting--and I'm not being critical of the IRS here, it's just
a fact, a reality----
Ms. TUBBS JONES. We understand that. Just say what you want
to say.
Ms. OLSON. But my people----
Ms. TUBBS JONES. You can be critical if you want to.
Ms. OLSON. I had a--yes, I know, believe me, I will be
critical when I want to be critical, you know, when I need to
be.
But I have a four-person office in West Virginia. On 1 day
they got 86 economic stimulus calls. If you think about that,
that's 20 calls a day per person, plus they have a workload of
about 42 cases per person at any given time. So, no work is
getting done in that office, if they're needing to talk through
these concerns with individuals and reassure them and help
them.
The calls are enormous to us, as well. We have gotten,
since the beginning of the year, about--over 3,500--about 3,500
cases dealing with economic stimulus. Just this past week we
got 300 of them. So, they're--just since Monday we got 300 more
cases in the Taxpayer Advocate Service dealing with problems
with the economic stimulus--not calls, but cases.
So, it just comes on and on, and I think they're just some
of the kind of things where things have gotten messed up, or
people don't know where their payment is, or there is--maybe
there is identity theft in them.
Some of them are injured spouse cases where there is a debt
that one spouse owes, and we're going to grab one-half of the
economic stimulus payment to pay back that debt, but the other
half should go out to the other spouse, who is not a debtor on
the debt. But the IRS systems aren't doing that consistently,
so the taxpayer won't get their payment, and we have to get in
there and get that payment.
Ms. TUBBS JONES. I will say this. If I had known then what
I know now, using that as a step toward processing, what would
you--give me two recommendations.
Ms. OLSON. Well, one would be I would really take the
lessons that we have learned from this and come to terms with
it's better to get the money out to as many people as we can
who are entitled to it, and tolerate getting some of the money
out to people who maybe, you know, they have debts to the IRS,
or you know, to child support or something. Let's just get the
money out there. Don't put so many exceptions into the rules,
you know, things like that. Tolerate some payments to people
that we wouldn't necessarily ordinarily give refunds to, but
allow it so that we can get the money out there, if that's the
goal.
Because I think the biggest problem with the economic
stimulus payment is we have got this general statement saying,
``Everybody is going to get their economic stimulus payment,
except you and you and you and you and you and you and you, and
then there are special rules for you, over here, and there are
special rules for you, over here.''
Ms. TUBBS JONES. Only time will tell us whether it has
really been stimulus.
Ms. OLSON. That is just a disaster for----
Ms. TUBBS JONES. The dollars that we have expended in
attempting to use it, to make it a stimulus, and in addition to
which, dollars that could well have been put to use that might
have made it better for Americans across the board versus
throwing it so that we could spend it at Wal-Mart, K-Mart, or
whatever-Mart.
But what else would you like to tell me, Ms. Olson, in
terms of second thing that if you knew then what you know now?
Ms. OLSON. Well, I do think we should do what I have
suggested before, which is try to figure out a way to get
automatic payments out to the population that already isn't
part of the IRS, the Social Security recipients, the Veterans
Administration recipients, you know, who are not filing with
the IRS.
Ms. TUBBS JONES. Would you have suggested, then, that that
had been their responsibility, versus the IRS, or we should
have----
Ms. OLSON. Well, again, I want that to be explored more,
but I really view that the two agencies, between the two of
them, should be able to identify who in that population was
eligible for the payment, and then we should have figured out a
way to get it out to them, rather than asking them to file a
return, you know, and come in, and do some affirmative act and
get it.
I think that's a problem with that population. It's asking
too much of them. So it doesn't surprise me that we're not
getting the pick-up from that population, you know, that we
might have hoped for.
Ms. TUBBS JONES. Then a lot of people said, ``To heck with
spending that money, I'm going to put it away, because I could
use it for something more important to me than going to a store
and buying some immediate piece of whatever,'' in terms of
stimulus.
Ms. OLSON. I am just worried about getting the money out to
them. I don't know what they're doing, once they get it.
Ms. TUBBS JONES. I feel you. Thank you. I yield back the
balance of my time.
Chairman LEWIS. Mr. Kind is now recognized for his
questioning.
Mr. KIND. Thank you, Mr. Chairman. I want to thank you for
holding this important hearing. Ms. Olson, you have been very
generous and very kind with your time here today.
I would agree with your last statement. I think the
greatest obstacle that we have for the non-filers, those who
we're trying to do our best to reach out to right now, is
inertia, trying to get them to take some type of step so that
they get into the system, and then qualify for the stimulus
check.
But let me just redirect you on a different line of
questioning. My pet peeve--and I expressed this earlier in the
year, too, when we had an earlier hearing--was the tremendous
amount of money that's being spent on not one, but two
notifications to tax filers in the country. According to our
calculations, it wasn't just one notice, pre-filing notice, but
also a second notice that went out, close to $100 million in
just those 2 notices.
So, $1 out of every $16 that's going out for stimulus is
going out or being used for basic notification purposes, going
to traditional filers, the vast majority of whom filed in the
past, are going to file again, will get automatic stimulus
checks, based on what they file. The vast majority of them
aren't going to be contacting the IRS for additional
information.
I understand the importance of outreach and notification,
especially for the non-filers out there, and the job we have to
do. I just don't want to be critical of the IRS or what we are
giving the IRS direction to do, because I think they've been
doing an incredible job, as far as turnaround time with not
only the stimulus, but with AMT late last year--and hopefully
we're going to be able to avoid a late AMT fix for the next
fiscal year, and avoid that box.
Ms. OLSON. Thank you.
Mr. KIND. But I would like to, you know, in the future,
with lessons learned with this latest stimulus, perhaps work
with you and others----
Ms. OLSON. Right.
Mr. KIND [continuing]. To see if there is a way we can
tighten up the notification----
Ms. OLSON. Right, right.
Mr. KIND [continuing]. For these stimulus measures, so it's
not just a broad----
Ms. OLSON. Right, right.
Mr. KIND [continuing]. Overreach, and I think a lot of
redundancy out there----
Ms. OLSON. Right, right.
Mr. KIND [continuing]. And perhaps find some taxpayer
savings at the end of the day, while still getting to that
harder-to-reach community----
Ms. OLSON. Right.
Mr. KIND [continuing]. That we want to reach out to right
now, who traditionally wouldn't file. That's where most of the
focus has been.
I know the IRS has been inundated yet again from questions
coming in. But my guess is that it's not the majority of those
who are receiving notification, the traditional filers, and
they basically have to do what they have always done in the
past. So, maybe there is a way of being able to tighten that
up, and with suggestions that you're offering today too, have a
better outreach with those harder-to-reach individuals.
But, you know, I was never a great fan with the whole
stimulus idea to begin with. The thought of borrowing $160
billion from China to give to people to fill up their gas tank
and sending the dollars to--it didn't really seem like it was
going to have much of a stimulus impact.
But this past week I have been back home, battling flood
waters with many of my constituents and communities in southern
Wisconsin, and I know that this, the timing of the stimulus, is
going to be welcome, whether it's $600 or $1,200, whatever they
get, in trying to help them get back on their feet. So, in that
respect, I know a lot of people have been struggling to make
ends meet right now. This little bit, as far as the stimulus
measure, can go a long ways to helping that take place.
But if you have any ideas, as far as outreach and
notification that might save us money and have a little more
targeted version, we would be interested to know.
Ms. OLSON. Well, Sir, I think one thing that the IRS has to
do is we have had a--if you look at this as a grand experiment,
we have had a real opportunity to learn a lot about how to
communicate with taxpayers as a whole, and with hard-to-reach
populations, in particular. What we really need to do is not
after this is over--you know, ``over'' in quotations--we have
to sit down even now, and then on an ongoing basis, and say,
``What have we learned, and what is better?''
I know that the IRS wanted to do those mailings in the
first place, based on its experience with the last tax rebate
in----
Mr. KIND. Right.
Ms. OLSON [continuing]. 2001, hoping to fend people away
from the phones. But I think the complexity of the message was
so great, and the contacts just generated so very early, and
people--you know, the message was, ``You're going to get your
money,'' and people were like, ``When can we get the money,''
and they were going to pick up the phone and call.
I think we just really have to study how we deliver a
message like that, where we deliver it, who delivers it, and at
what level, whether it's national or, you know, area, or local
community, and what is the best way to get out what parts of
the message. I think we've got lots of data in which to learn
from this experience.
Mr. KIND. Right.
Ms. OLSON. I will certainly be studying it.
Mr. KIND. Right. Thank you very much. Thank you, Mr.
Chairman.
Chairman LEWIS. Thank you. Mr. Neal is now recognized for
his questioning. Congratulations, Mr. Neal, on Boston winning.
Mr. NEAL. I appreciate that.
Chairman LEWIS. I know you're not from Boston.
Mr. NEAL. I played----
Chairman LEWIS. I know you represent the home of----
Mr. NEAL. But I did play a heck of a game.
Chairman LEWIS. You represent the home of the beginning of
basketball, Springfield, right?
Mr. NEAL. It's true. It's nice to return that trophy to
where it belongs.
Paper correspondence. Crisis proportions yet?
Ms. OLSON. I think it is in crisis proportions. I think,
you know, once we get through October 15th with the stimulus,
we're going to be dealing with the fall-out from what has
happened to the IRS in handling these calls into the next
filing season.
Mr. NEAL. What does that mean to the taxpayer, Ms. Olson?
Ms. OLSON. Well, for the taxpayer, if someone writes in--
gets a notice from the IRS--let's just give a simple example--
saying, ``We see that there is a 1099 on your return, a W2 that
you forgot to list on your return,'' and that taxpayer is a
victim of identity theft, it's somebody else's information, the
taxpayer writes back saying, ``No, no, no, this is not mine,''
if we don't get that correspondence to the person who is
working that case, that person, that IRS employee, is not going
to know that there is another explanation, and they're going to
go ahead and assess the tax against that taxpayer, and the next
thing the taxpayer knows is that they're either going to have
to go to Tax Court, or request an audit reconsideration, or
they may be in the collection arena.
Mr. NEAL. Thank you. Thank you very much, Mr. Chairman, for
that skill in getting my question in and promoting the Celtics,
and a reminder that that championship trophy, the Lawrence
O'Brien Trophy, is named for a son of Springfield. Thank you,
Mr. Chairman.
Chairman LEWIS. My pleasure, very delighted. Mr. White, Ms.
Olson, I want to thank you for your testimony, for being here
today. We look forward to working with you to reach taxpayers
who have not filed a rebate check. Thank you for your good
work.
The Committee will recess for a half-an-hour. We have a
series of votes on the floor.
[Recess from 11:34 a.m. to 12:14 p.m.]
Mr. MCNULTY [presiding]. The hearing will come to order.
Chairman Lewis has another commitment at the present time, and
we hope and expect he will be back at some point during the
testimony of the second panel. In the meantime, he has asked me
to reconvene the two Subcommittees.
I want to welcome both of the commissioners for being here,
and for the tremendous job that they are doing for our
constituents all over the country. I would remind both
commissioners that your entire statement will appear in the
record. We ask you to try to summarize, if possible, within 5
minutes, so that we can get as many questions as possible.
It is now my pleasure to introduce the commissioner of the
Internal Revenue Service, Douglas Shulman.
STATEMENT OF DOUGLAS H. SHULMAN, COMMISSIONER, INTERNAL REVENUE
SERVICE
Mr. SHULMAN. Good morning, Chairman McNulty, Mr. Pascrell,
Mr. Brady. This is my first appearance before Ways and Means. I
am two-and-a-half months into a 5-year term. I have gotten to
speak with a number of Members individually, and I am looking
forward to working with all of you while I am here.
As you know, I am here today to discuss the economic
stimulus legislation enacted by Congress last year. The
responsibility for distributing this one-time payment to
taxpayers was assigned to the IRS right in the middle of filing
season, which is our busiest time of year. Nevertheless, we
understood that the point of the economic stimulus was to
provide a stimulus to the economy, and so we tried to balance
getting the checks out as quickly as possible with some of the
operational realities of doing so.
I would also just like--before I say a few words about the
progress--just to recognize my colleagues from the Social
Security Administration, the Department of Veterans' Affairs,
as well as my colleagues at the Financial Management Service,
who are responsible for actually distributing the checks, once
we identified the amount, et cetera. The support in partnership
was phenomenal. I think it's a model of how the Federal
Government--at least I would hope--would work.
As of June 13th, we have distributed $63.8 billion in
stimulus payments to over 76 million taxpayers. I am proud to
report that the first stimulus payment was direct deposited
into a taxpayer's account a mere 70 calendar days after the
stimulus legislation was enacted. I will tell you I came in the
middle of this, I started March 24th. I have 3 meetings a week
with the 40 people most responsible for stimulus, from
technology to operations to customer service to compliance, and
it's really been a phenomenal job. I am quite proud of the
people of the IRS who made this happen.
In addition, outreach was incredibly important. As a
general matter, we tried to publicize that all you needed to do
was file a tax return to get your stimulus payment. We also
paid special attention to the potentially 20 million people who
usually don't file a tax return, but needed to file a tax
return this year to receive their economic stimulus payment.
We partnered with AARP and the United Way, just to name a
few. We ran what you've already talked about, Super Saturday.
We opened 320 of our sites and 400 partner sites to seniors,
veterans, and low-income workers, to come in and get their
stimulus payment--by filing their stimulus return. We worked
very hard to spread the word.
As you know, as the nation's tax administrator, we did not
start this process with a master list of those Social Security
and veterans beneficiaries who are eligible for stimulus
payments but usually don't file a return. Nonetheless, through
our outreach, I am pleased to say that, as of now, we have
accounted for 15 million out of the 20 million people who we
thought might be eligible.
I do want to correct the record. I know a previous witness
said that we had found seven million people. We have actually
accounted for 15 million. They have either filed for
themselves, or they're listed on somebody else's return.
While this is good progress, we also recognize that there
is more work to be done. So we've planned an outreach campaign
for this summer. We're going to entitle it, ``It's Not Too Late
to File.''
Today, we are distributing to your offices and offices of
other Members of Congress a packet that will give you detailed
demographic information about who in your District might be
eligible to file a return and hasn't yet filed. We would love
to partner with Members of both Subcommittees to try to do
outreach and get more people into the system.
We are also going to send another mailing. We're going to
do more media. Just this afternoon, we have a conference call
with 50 Spanish language media outlets to try to promote to
people who haven't yet filed that they can still get a stimulus
rebate.
Let me just give you a couple of on-the-ground observations
from stimulus program. I have been visiting our taxpayer
assistance centers, and our phone centers, during this time.
Any undertaking that is this large and complex is certainly not
going to be error free. We currently estimate, though, that
over 99 percent of people eligible for stimulus who have filed
their tax return are on schedule to get their stimulus payment
on time with no issues and no problems.
To give you a sense of, when issues occur, how we're trying
to attack them, let me just talk about the child tax credit
issue that emerged. We found out about a month ago that there
were taxpayers who didn't check the box correctly on their tax
return, saying that they were eligible for child tax credit,
and therefore, weren't getting their stimulus child tax credit.
We also found there were some software vendors who had a
glitch in their program. When returns came in to us, they came
in improperly, and so people weren't getting their child care--
weren't getting credit for dependent children for their
stimulus returns.
Under normal circumstances in tax administration, we would
say either the taxpayer didn't do it right, or the software
vendor didn't do it right, and so we would send it back to the
taxpayer and we would say, ``File correctly''. They would need
to file correctly to get their stimulus payment.
Because we know it's so important that we go the extra mile
with these people--about 230,000--we actually now are
correcting their return for them, correcting the error that
either the software provider or the taxpayer made, running a
batch of new stimulus checks, and in July those people will get
the extra $300 per child that they were due under stimulus.
That's the kind of thing we're trying to do, is be creative and
be very aggressive in making sure we fix problems as we see
them.
I'd be happy to answer questions. As you know, our phones
have gotten quite overloaded, and we have worked hard to manage
our resources against those. We are using the same people to
run the stimulus program as run filing season. We're doing the
late AMT fixes to get ready for filing season. So, this hasn't
been the easiest undertaking for the IRS, but I'm quite proud
of the work we have done, and I'm happy to answer any
questions.
[The prepared statement of Honorable Mr. Shulman follows:]
Statement of The Honorable Douglas H. Shulman, Commissioner of the
Internal Revenue Service
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Mr. MCNULTY. Thank you, Commissioner Shulman.
I am now pleased to welcome Social Security's Deputy
Commissioner for Operations, Linda McMahon.
STATEMENT OF LINDA S. McMAHON, DEPUTY COMMISSIONER FOR
OPERATIONS, SOCIAL SECURITY ADMINISTRATION
Ms. MCMAHON. Thank you, Mr. Chairman and Members. On behalf
of Commissioner Astrue, I appreciate the opportunity to testify
before you regarding the Social Security Administration's (SSA)
efforts to help implement the Economic Stimulus Act of 2008. I
would like to explain what we have done in support of IRS to
provide stimulus payments, including our substantial outreach
efforts, and how we have used the funding that Congress
provided for this purpose.
The President and Congress took swift action to provide
targeted, immediate financial assistance to individuals and
families across the country. It was with that same sense of
urgency that SSA worked closely with IRS to develop a process
that would ensure prompt delivery of stimulus payments to
eligible Social Security beneficiaries.
Our initial challenge was to provide IRS with the data they
needed to inform Social Security and the Department of Veteran
Affairs (VA) beneficiaries that they had to file a tax return
in 2007 if they hadn't filed one in 2006, in order to receive
the stimulus payments. We already had systems in place to
deliver Social Security data to IRS, but the VA lacked the
systems capacity to match its beneficiaries against IRS
records.
To work around this problem, SSA added the 2.6 million VA
names to our own listing of Social Security beneficiaries,
eliminated most duplicates, and then forwarded a single file of
55.5 million names and addresses of VA and Social Security
beneficiaries to IRS.
We also worked with IRS to develop a simplified packet of
information that would be understandable for our beneficiaries,
and provide step-by-step instructions on how to file a return
and qualify for the stimulus payment. The packet included
instructions, forms, and even a postage-paid return envelope.
IRS matched the names that we sent them against their
files, identifying approximately 21 million VA and Social
Security beneficiaries in the United States who did not file a
tax return in 2006, and mailed the informative stimulus packets
to them. We understand from IRS that--and I think you've heard
it here--that this streamline process is leading to a
significant response rate. Everybody wants 100 percent, but
believe me, in these kinds of programs, 75 percent is
outstanding.
The targeted mailing was a vital step in ensuring our
beneficiaries received information about their eligibility for
a stimulus payment.
But we didn't stop there. We placed a prominent link on
both our English and Spanish Internet homepages, directing
individuals to the IRS website, and the information there on
the stimulus payment.
We utilized e-mail, sending a message about the stimulus
payments to nearly 800,000 individuals who are signed up to
receive Social Security-related news.
We worked with IRS to create a stimulus payment flyer that
specifically targeted Social Security beneficiaries. We then
printed more than 1.6 million of these flyers in English and in
Spanish for our field offices to distribute to visitors.
We worked with advocacy groups at the national level and in
local communities, sharing copies of the flyer with them.
Across the country, in hundreds of speeches and other
Social Security-related events, SSA employees have provided
information and answered questions about the stimulus payment.
In addition, our Regional Communications staff has joined
IRS professionals in outreach events.
Also, every caller to our National toll-free 800 number
receives an up front message about the stimulus payment. Our
toll-free number has received nearly 27 million calls since
that message was placed online, and every one of those calls
presents another opportunity to tell people about eligibility
for the stimulus payment.
Turning to budget issues, as a part of the Economic
Stimulus Act, Congress provided SSA with an appropriation of
$31 million. So, far, we have obligated $18 million of those
funds. We have spent about $6.4 million on printing and
postage--actually, for the notice that IRS sent out to our
beneficiaries--approximately $10 million answering beneficiary
inquiries and providing replacement 1099s, and $1.4 million on
training and required systems work.
We were actually able to reduce some of the anticipated
costs by working with IRS on a simplified method of processing
stimulus payment tax returns. For example, at our suggestion,
IRS ruled that individuals could estimate the amount of Social
Security benefits received, reducing the need for SSA to
replace 1099s.
While many Social Security beneficiaries have already filed
the necessary forms to receive a stimulus payment, we know
there are still some individuals who have not responded to the
first mailing. We will continue our efforts to reach these
individuals through the means that I have already described,
and working with IRS.
In conclusion, I thank you for the opportunity to share
what we have done, in collaboration with other Agencies, under
the leadership of the IRS, to facilitate the economic stimulus
payments. Together we have made great strides, and I am
especially pleased that, so far, we have been able to make this
progress in a manner that has not threatened SSA's core
workloads.
I also will be glad to answer any questions.
[The prepared statement of Ms. McMahon follows:]
Statement of Linda McMahon, Social Security Administration Deputy
Commissioner for Operations
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Mr. MCNULTY. I thank both of you for your testimony. I
thank you for the job that you have done so far, under the
difficult circumstances, especially in the middle of the tax
season.
But we still have five million people to get to. That's a
lot of people. We want to get as close to 100 percent as we
possibly can. So, I want to commend you for the outreach
efforts you have made so far, and the renewed efforts that you
talked about today.
We are going to try to help with that. Chairman Lewis and
I, along with Ranking Members Ramstad and Johnson are sending a
letter to all Members of the House of Representatives, asking
them to include in their newsletters, press releases, press
statements, press events, and so on back in their home
district, information about how to get the proper paperwork
filed so that we can help you along with getting the word out
and getting these checks to as many people as possible.
The one question I would like--issue I would like an update
on is, you know, when you do the outreach, a lot of times you
increase the number of phone calls that come in, and I know
that has been overwhelming. We might need a little bit more
help with that.
There was some talk, I believe, between both of the
agencies about getting GSA involved to help with that. Could
you give me an update on where we are on that?
Mr. SHULMAN. Sure. As you know, we have had a chance to
visit--we have had an unprecedented number of phone calls. Just
to give Members of the Committee a sense, in 2007 we had 19
million phone calls in the month of May come into the IRS. It
was kind of clean-up for the tax season. In May of this year we
had 72 million phone calls come into the IRS. So the numbers
are staggering.
I reached out a couple of weeks ago to Commissioner Astrue,
he said, ``Okay, I'm thinking about who else had large phone
operations,'' and said, ``Does Social Security have capacity?''
So that is, I think, what started this conversation to give us
some assistance, because the phone calls keep coming in a
little longer than we had thought.
We are in the process, just like that phone call, of
exploring a variety of options. There are actually some
limitations in going outside of our building to answer phone
calls. As you heard earlier, and you've seen in my written
testimony, we have diverted some personnel to answer phones
from other duties. We have also kept overtime workers on to
answer phone calls.
One of the major problems is people outside of the IRS can
answer simple questions like, ``How do I fill out the form,
where do I send it?'' Anyone who has a specific issue, which a
lot of the taxpayers who call do, have to actually get into
their tax records, 6103 implications.
So, we are exploring all options, and looking outside the
Agency, but we're also going to keep our head down, and make
sure we do everything we can inside of the IRS.
Ms. MCMAHON. Mr. Chairman, I want to thank you very much
for your earlier comments today, recognizing the constraints
that SSA is under, and the problems that we're dealing with,
just handling our core work.
We want to be as helpful as we can, and we are in a
position, because of the funding that we were given by
Congress, to actually provide some funding to IRS to help with
either a contract with USA Services, or to assist with the next
mailing they do, those kinds of things, and we're going to do
that.
Our problem is we don't have actual capacity. We are
working maximum overtime now. Anything we do on this is
something that we're not doing on our core work. It's not a
question of if we have people who can come in on overtime and
do some other work. It's a question of if they come in on
overtime, instead of doing our work, they will do the other
work. We would prefer not to go there, if we can avoid it.
Mr. MCNULTY. Thank you very much. Mr. Ramstad may inquire.
Mr. RAMSTAD. Thank you, Mr. Chairman. Thank you,
Commissioner and Deputy Commissioner, for your testimony, and
also for your important work on behalf of taxpayers and Social
Security recipients.
Mr. Shulman, you really had to hit the ground running when
you became the commissioner in March. I know you arrived in the
middle of a hectic filing season, and had to, at the same time,
oversee the massive economic stimulus project we are discussing
today. I want to congratulate you for doing a tough job very
well.
I would also like to ask you two questions on two different
topics.
First, with respect to our brave--the spouses of our brave
soldiers, sailors, airmen and Marines, I know in order for
married couples to qualify for the full rebate, that both
spouses must have valid Social Security numbers. Just this
week, as I'm sure you know, the President signed the Heroes
Earnings Assistance and Relief Tax Act, which waives this rule
for spouses in military families.
How will the IRS determine which returns are affected by
the new rule?
My second question, is the IRS working with the Department
of Defense to do a military outreach, to do outreach to
military families on the new law?
Mr. SHULMAN. Yes, we obviously agreed with the law, and
have been tracking it.
But, initially, we actually talked to this Committee and
others, and told them that we wouldn't be able to true this up
until next filing season, a year from now. As it passed, and as
we've tried to do with all things stimulus-related, we've said,
``Let's get creative, let's push very hard.''
I am pleased to report that the current plan is some time
around mid-October, when all the returns get in, we will run a
match and aim to distribute checks no later than November to
these families who weren't eligible under the first run. We
will do another run once we have a full complement. So, we
can't identify them, and we plan to get them out later this
year.
We have done a lot of outreach to many communities, and we
will definitely reach out to the Defense Department, and make
sure people understand, really, that they don't need to do
anything, as long as they have already put their--Social
Security number on there of a spouse or someone who doesn't,
that we will get this out to them.
Mr. RAMSTAD. Well, thank you, Commissioner, for that
response, because you can obviously--or you obviously do see
the significance of this. I mean, of all taxpayers, we--there
are so many military families who are hurting right now,
financially and otherwise. I think this is--I am glad to see
the Service giving this such a top priority, and I appreciate
your leadership and your creative creativity, in terms of
getting this done.
The other questions I had concern the refund anticipation
loans and taxpayer refunds. Earlier today--I know you were
here, and you heard Mr. Pomeroy say that a number of taxpayers
signed up for refund anticipation loans when they went to paid
preparers. Some preparers did not indicate the bank accounts
listed on the returns--did not indicate that the bank accounts
listed were temporary refund anticipation loan accounts, and
not a permanent account of the taxpayer.
I know I have had a couple of constituents broach this
problem with me. In the cases in which the IRS sent a payment
to a temporary account, how did the IRS or the bank work to
correct the problem? Is that--are you on top of that? Were the
payments returned to the IRS? Were banks able to forward the
payments to the rightful recipients? I would like you to
address both those questions, please.
Mr. SHULMAN. Sure. Well, the way this works is when you get
a refund anticipation loan in the normal filing season--any
taxpayer--the service provider who gave the loan, files the
return. They actually disperse money ahead of time to the
taxpayer, and they receive the refund. When they file with the
IRS, they're required to put a RAL indicator on the account, so
it will indicate that they have an account.
So, what we did was we didn't actually send them to those
accounts. What happened was anyone who had a RAL indicator, we
knew that wasn't their account, and that was the account of the
service provider. So, we were sending it to the taxpayer. So,
those people never got a direct deposit. It was rerouted, and
they were sent a check.
There was one vendor that we found who actually hadn't put
a RAL indicator on accounts. We talked to them very early. We
put RAL indicators in and sent checks.
So, the real issue and confusion that I think some
constituents have had is around that they got a refund
anticipation loan direct deposited to an account of theirs, or
a RAC. They assumed they were in the direct deposit stream for
stimulus, and they weren't, because again, we didn't know that
they had accounts.
So, there was a lot less--we haven't heard of, or at least
I'm not aware of ones that accidentally went to an account we
had to get back because of a refund anticipation loan. The
bigger issue has been there is a lot of people who thought they
were going to get the direct deposit, which came quicker in
May, and they're actually getting checks now, and through the
week of July 11th.
Mr. RAMSTAD. Well, thank you very much, Commissioner. I
yield back.
Mr. MCNULTY. Mr. Pascrell may inquire.
Mr. PASCRELL. Thank you, Mr. Chairman. Commissioner
Shulman, thank you for doing a great job in a very short period
of time. You have, I believe, the tiger by the tail. But there
is a tremendous amount of work ahead of you. I want to get into
that work.
I want to thank you, Commissioner McMahon, for all your
service to your country through the position with the Social
Security Administration.
My first question is this, Commissioner Shulman. We have
payments going to 76 million Americans, payments of a total of
$63.8 billion. That is 70 percent of what we are trying to
target. Is that correct or incorrect?
Mr. SHULMAN. We--I think, if you're asking about--let me
presume what you're asking, and you can tell me if I'm right. I
think you're asking about the targeted population that we're
doing extra outreach to?
Mr. PASCRELL. How far do we have to go----
Mr. SHULMAN. Yes. It's--so the $63 billion that has gone
out is part of the total $100 billion economic stimulus
payments. So, those are numbers for the entire population----
Mr. PASCRELL. Right.
Mr. SHULMAN [continuing]. Regular filers, and people who
normally wouldn't need to file. And----
Mr. PASCRELL. So, what percentage do we have to go after,
approximately, and how much more money needs to be sent in
checks to those individuals?
Mr. SHULMAN. Well, we're on target for the original
projections.
Mr. PASCRELL. Right.
Mr. SHULMAN. So, by the week of July 11th, when the first
wave of checks would go out to anyone who filed on time, we
will have $95 billion distributed to about 110 million
households.
Mr. PASCRELL. That's how we come up with the five million
that we're having----
Mr. SHULMAN. No, that's totally different numbers.
Mr. PASCRELL. Totally different?
Mr. SHULMAN. Yes.
Mr. PASCRELL. How do we get to that number?
Mr. SHULMAN. That number, the 5 million, we estimated with
Social Security and Veterans' Affairs Department, that--we
thought--there was a special population of about 20 million
people who were eligible for stimulus, but normally wouldn't
file. Those----
Mr. PASCRELL. So, in other words----
Mr. SHULMAN [continuing]. We have hit about 74 percent.
Mr. PASCRELL. Is it safe to say that the majority of those
people that still have to get their stimulus check are veterans
or non-Social Security recipients?
Mr. SHULMAN. I don't think it is.
Mr. PASCRELL. You don't think it is?
Mr. SHULMAN. Yes. I think--we--separate population. There
are a lot of Social Security recipients and veterans----
Mr. PASCRELL. Right.
Mr. SHULMAN [continuing]. Who have gotten the check. There
are also folks who needed to file regularly. So, we are really
breaking it down into everyone who is going to file anyway, and
get a stimulus payment----
Mr. PASCRELL. So, between the last numbers that you
provided, $63 billion, and $120 billion, which should be out by
July 11th, that's a lot of checks to have to go out.
Mr. SHULMAN. The total number by the end of the year will
be about 100 billion.
Mr. PASCRELL. 100 billion.
Mr. SHULMAN. Yes, Sir, yes.
Mr. PASCRELL. Not 120; 100.
Mr. SHULMAN. Yes.
Mr. PASCRELL. Okay.
Mr. SHULMAN. There is real--we basically identified
everyone, or they self-identified by filing a tax return,
except for that five million who, as we've talked about, we're
going to make an extra effort to go find.
Mr. PASCRELL. Just a quick question, and then I want to get
into my second series. What is the status of the paper
inventories?
Mr. SHULMAN. Yes. One of the consequences of having so much
overload on our phone, there are temporary employees we bring
on every filing season. They answer phones and they workpaper
inventory. They usually would roll off of the phones near the
end of May, and start working down a paper inventory.
Right now, we have a lot of extra paper inventory. The
numbers, we've got about two million pieces of paper inventory
to work through.
Mr. PASCRELL. Right.
Mr. SHULMAN. Usually, we would have about 1.3 million at
this time of year, so it's not an absolute number.
Mr. PASCRELL. It's 700,000, 800,000 more.
Mr. SHULMAN. Yes, it's significantly more. That's one of
the issues we're going to need to work through this year.
Mr. PASCRELL. Do you have the resources to respond to that?
Mr. SHULMAN. If we can keep our temporary employees later,
we----
Mr. PASCRELL. What does that mean, though? You have money
that's allocated. Do you have enough money that's allocated, so
you can keep them?
Mr. SHULMAN. We are in the process of actually talking with
different Committees in Congress. The money has been
appropriated, we just need some authority to move it between
different accounts. If we do, we will be able to staff up and
work down that inventory.
Mr. PASCRELL. There are many complaints that I get in my
office up in Patterson, New Jersey, in the same building that
conveniently, or inconveniently, is the IRS and Social
Security.
Several of my constituents have complained that they are
not able to get assistance from IRS. You talk about this phone
overload. There is a toll number that you can, you know, dial
up. They can't get the--the same thing happens on the rebate
line.
Can you address that? Is that a common problem throughout
the country?
Mr. SHULMAN. Yes, it is--we have an 800 number. I gave you
a few stats, you know, 72 million calls in May versus 19
million last year.
Mr. PASCRELL. Right.
Mr. SHULMAN. Another interesting statistic, in 2001, when
there was another stimulus program, we got 42 million calls
during the 15 months of that program. Again----
Mr. PASCRELL. You're up about 52 million calls from what
you usually have.
Mr. SHULMAN. What's that?
Mr. PASCRELL. You're up about----
Mr. SHULMAN. Yes. So----
Mr. PASCRELL. How do you handle it?
Mr. SHULMAN. So, here is what's happening on the phones.
You call the IRS phones, we have been very clear on the message
that you don't need to talk to us if you filed a tax return. So
we encourage you to, if you filed a tax return, be patient, you
will get your stimulus payment on time. We encourage people to
go to our website.
We also tell people there is heavy call volumes now, so
they're going to have to wait longer than normal. Normally,
people wait a few minutes, our target is under 6 minutes now.
In the month of May it was up to about 13 minutes, average.
So, people can get through. They might have to call a
couple of times. Some people get to automated service, some
people hang up when they hear there's a wait time. Again, this
is where we'd like not to be, but it's a fact of doing stimulus
in the middle of filing season.
Mr. PASCRELL. But, Commissioner, the people that you want
to go to your website are the very people who can't get to your
website. The very people that are the majority of individuals
who--and I don't care what the program is, what we're talking
about, whether it's EITC or AMT, or whether, in this case, the
stimulus checks. You know, we've got to find another way to get
to them, because they have no way of getting on to the website.
They may be in homes, they may be----
Mr. SHULMAN. Yes.
Mr. PASCRELL. You know, I just have one other quick
question, if I may?
Mr. MCNULTY. Yes.
Mr. PASCRELL. You said in your testimony that one of the
major problems was differentiating between the refunds and
stimulus payments, because they came at the same time, correct?
Tax refunds, right?
Mr. SHULMAN. In the same----
Mr. PASCRELL. On page three you address that. The economic
stimulus payments, you wrote, overlap with the normal tax
refund season.
Just very briefly, tell us what that convoluted system--you
know, how did it result? What was the outcome?
Mr. SHULMAN. Oh. It's as I said in my oral testimony, when
Congress passed the bill----
Mr. PASCRELL. Bad timing.
Mr. SHULMAN [continuing]. For stimulus, and the President
signed it, the goal was to get the money out as quick as
possible.
Mr. PASCRELL. Right.
Mr. SHULMAN. The reason we started in May is because we
didn't want to endanger tax filing season in April. The numbers
are pretty compelling. This year we sent out $241 billion in
refunds. So we were trying to stimulate the economy, we thought
it was quite important to get the refunds out, as well.
So, this was just a fact. We basically moved the stimulus
payments to a place which was as quick as possible, yet being
prudent, acknowledging the----
Mr. PASCRELL. So, the----
Mr. SHULMAN [continuing]. The filing season.
Mr. PASCRELL [continuing]. The refund total was a greater
stimulus package than the stimulus package?
Mr. SHULMAN. The refunds were $241 billion.
Mr. PASCRELL. Thank you, Mr. Chairman. Thank you,
Commissioner.
Mr. MCNULTY. Mr. Brady may inquire.
Mr. BRADY. Thank you, Mr. Chairman. I don't raise the fuel
price issue to make anyone in this chamber uncomfortable, it's
just that the price of fuel is making so many of our families
uncomfortable, especially seniors, who are on fixed income.
When you take--when they have to deal with paying $536 more
this year than last year on gas, plus increased Medicare
premiums and they're on a fixed income, they've got a problem.
I visited with a senior the other day at a gas station in
Bridge City, Texas, who was upset because she could no longer
attend church on Wednesday night because she needs the gas to
take her husband to all of his doctor visits during the week.
So, seniors on a fixed income are really getting hurt by these
fuel prices. A number of them are eligible for stimulus checks.
I really appreciate the job both of you are doing in reach
out to them. We have a long way to go.
But in Texas, we have a number of retirees who are not
covered by Social Security. They are in a Social Security
substitute like the Texas Teacher Retirement system. They have
asked us a question about whether their pension benefits would
make them eligible for the stimulus payments.
As you may recall, Social Security benefits, certain
railroad retirement benefits, and certain payments to service
men were specified as counting toward income levels needed to
make someone eligible for the stimulus payment, but there was
no mention of pension income counting, such as from non-covered
employment.
Others have said since these pensions are taxable,
recipients would qualify for a payment, because they have a net
income tax liability which is greater than zero.
Commissioner Shulman, would you set the record straight for
me on this issue? What is the right answer for them?
Mr. SHULMAN. The right answer--and I would go back to our
technical folks as well--but is if they have tax liability for
any income, then that makes them eligible.
In general, pension payments are not, unless they are
taxable pension payments. So--but all of this is us just
executing the law as it was written.
Mr. BRADY. So, as I understand it, seniors would be
eligible, in this case, if they had $3,000 of earned income, or
at least $1 in income tax liability. That would trigger them,
correct?
Mr. SHULMAN. I believe the answer is yes, but let me get
just the details of your question and come back to you
afterward, so I don't get the record wrong.
Mr. BRADY. Here is my worry. Retired teachers, especially
those who retired from many years ago who had low salaries, and
therefore very low retirement benefits, if they don't get
enough in Texas Teacher Retirement to trigger tax liability, my
understanding is they would be left out of a stimulus check.
Mr. SHULMAN. Well, my understanding is, in reading the law
and administering it, that the law was written very
specifically, that you had to have $3,000 in taxable income,
unless you were part of an exempted category.
So, you know, if the law was written that way, that's
probably correct.
Mr. BRADY. So, the Social Security benefits don't qualify
them, because they don't get them. If they don't reach the tax
liability trigger, they don't move in--they aren't eligible
under that category. I am----
Mr. SHULMAN. Well, I think Social Security was exempted
under the law, and that was the design.
Mr. BRADY. Right.
Mr. SHULMAN. So, Social Security counts, pension benefits
count----
Mr. BRADY. Right, but if they don't receive Social Security
because they're in a substitute, and those substitute payments
aren't enough to trigger even a dollar of liability, they
wouldn't receive a stimulus check?
Mr. SHULMAN. I believe that is correct, under the law.
Mr. BRADY. Okay. That is a worry, because we do have a
number of teachers in that situation in Texas. Again, you know,
while those with modern-day retirements, I think, would trigger
into it, because the liability--those who, again, thankfully
taught back when wages for teachers were just intolerably low,
their benefits, I'm afraid, won't move them in the trigger yet.
I think they are probably some of the group that we most
need to reach with these stimulus payments. Chairman, thank you
very much.
Mr. MCNULTY. Thank you, Mr. Brady. On behalf of Chairman
Lewis and Ranking Members Ramstad and Johnson, I want to thank
both commissioners for being here today for your good work, and
for your testimony.
I want to compliment you again on the job that has benne
done so far, but reiterate the fact that five million people
are still out there and eligible, and we need to get to them.
So, I commend you for the outreach efforts which you are
undertaking.
Jim and I just signed letters that are going to be signed
by Sam Johnson and John Lewis to every single Member of the
House of Representatives to reinforce that message all across
the country. So, I hope we can help in that regard.
Also, I would like, obviously, both agencies to keep in
close contact with us, to let us know any other ways in which
we can be helpful.
With that, this hearing is adjourned.
[Whereupon, at 12:51 p.m., the Subcommittees were
adjourned.]
[Submissions for the Record]
AARP, Statement
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Morrison Affairs Public Group, Statement
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National Council on Aging, Statement
The National Council on Aging (NCOA) thanks the Chairman Lewis,
Chairman McNulty, and Committee Members for the opportunity to submit
testimony about our work to assure that all eligible seniors get an
Economic Stimulus Payment and to make recommendations to you based upon
our experience with the stimulus payments to date.
NCOA is the oldest nonprofit organization dedicated to improving
the lives of older adults, with a special focus on ensuring that low-
income seniors are able to access the benefits that will improve their
lives. When the economic stimulus payments were being discussed by
Congress, NCOA immediately recognized the importance of also including
the many millions of Social Security beneficiaries and veterans who
receive disability benefits, but who no longer file tax returns in the
economic stimulus package. NCOA and other organizations encouraged
Congress to include these populations in the final economic stimulus
package.
Upon passage of the economic stimulus package we went to work on a
special outreach campaign to reach out to seniors who do not normally
file tax returns. We developed and posted economic stimulus payment
resources for seniors and the aging network to the National Council on
Aging Web site www.ncoa.org For our partners in the aging network we
developed a new page on the My Medicare Community, our online community
at www.MyMedicareCommunity.org, as a central repository of information
about the program for benefits counselors who work with seniors. There
have been over 2,000 views of this page. We have also worked directly
with the IRS and many new and old partners to assure that all seniors
receive their stimulus payment.
As Social Security and IRS matched data to identify 20.5 million
seniors and veterans who do not usually have to file tax returns, it
became apparent that lack of familiarity with even the simplest tax
return could prevent many from filing for their stimulus payment. NCOA
worked quickly with AARP Tax-Aide to develop a user-friendly online
tool to assist in the completion of IRS 1040A forms.
The Web based tool does not look like a tax form; it asks seven
simple questions and then pre-populates the required 1040A tax return.
Moreover, the tool offers simple, easy-to-understand directions to
assist individuals in completing and printing the IRS 1040A form. The
tool provides personalized instructions on where to mail the completed
form and prints a second completed 1040A for individuals to retain for
their records. The tool makes it easy for stimulus payment filers,
family members, caregivers, and benefits counselors to take the
necessary steps to file for the stimulus payment.
Since its launch in March 2008, more than 25,000 people have used
the Stimulus Payment Tool, and traffic to the tool continues to grow.
This tool can be accessed either at NCOA's www.BenefitsCheckUp.org or
through AARP's Web site at www.aarp.org/stimulus help
NCOA commends the IRS and SSA for their efforts thus far and
congratulates them on reaching over 70 percent of this special
population, but continued efforts are now urgently required to engage
the individuals who have not yet filed a 1040A. Based on our prior
experience reaching out to low-income seniors, and our intensive work
to get stimulus payments into the hands of this population, we make the
following recommendations:
National Council on Aging Recommendations
1. We are impressed with the extensive database IRS has shared
with the Congress and with national partners that shows where the
remaining 5.2 million seniors and veterans live. We believe the data
can be used to drive an energetic outreach campaign to reach this
cohort that has not yet filed. In order to assure the widest and most
effective use of the data to target outreach, education and tax filing,
we have committed to post the database to our Web site so that
community-based organizations within the Aging Network can have easy
access in order to plan outreach and filing campaigns. Further
refinements to this and other similar databases of seniors with limited
income and resources have the potential to provide critical information
in promoting efforts to find and enroll this hard-to-reach population
in benefits they are eligible for, but still not receiving.
2. We fully and enthusiastically support the IRS in its decision
to send a second letter to reach out to the 5.2 million seniors and
veterans who have not yet filed for their stimulus payment.
NCOA is disappointed, however, that the IRS has determined not to
include pre-populated 1040A tax returns with each letter. IRS has a
significant amount of data from which to pre-populate tax returns for
this population. Due to the data exchange between IRS and the Social
Security Administration, we believe IRS has sufficient information to
pre-populate tax returns for this hard-to-reach population with minimal
risk to IRS error rates. Pre-populated forms would alleviate the
anxiety and fear of complexity that many people who have not had to
deal with the IRS in many years feel about filing tax forms.
Additionally, removing many data entry elements would encourage more
individuals to apply for the stimulus payment to which they are
entitled. The population that subsists solely on disability and/or
Social Security payments could truly benefit from the stimulus
payments. Pre-populating forms would ensure that more people receive
their payments.
Next, NCOA very much appreciated the opportunity we were given to
comment on the draft of the second IRS mailing. We recommended to the
IRS concise text and a call to action designed to motivate the specific
hard-to-reach cohort of 5.2 million seniors and disabled veterans. We
urged clear, plain language in order to encourage individuals to take
the action needed, with language and format to accommodate possibly low
literacy levels of many within the remaining 5.2 million.
We would also suggest customizing a message and design for the
envelope in order to motivate those who receive it to open and read the
important message contained within it.
3. We encourage the IRS to continue its very productive
partnership with national organizations, like NCOA, that have
experience reaching out to low income older adults. NCOA successfully
reached the much of the elderly population during the introduction of
the Medicare Part D benefit and provided personalized assistance to
many seniors to enroll in the low income subsidies (Extra Help).
Collaborating with local partners and organizations across the country
has proven to be effective in the past and NCOA proposes that the IRS
work closely with local organizations that the remaining 5.2 million
individuals already know and trust. These organizations can readily use
the Economic Stimulus Tool to file tax returns for their clients, so
they can get the stimulus payments that are so important especially in
light of rising food and fuel prices.
4. We encourage congressional offices to use the Economic Stimulus
tool developed by AARP Tax Aide and National Council on Aging and found
at www.BenefitscheckUp.org and www.aarp.org/stimulus help to promote
its use and to enable constituents who are unfamiliar with IRS forms to
easily file for their stimulus payments.
5. We urge the Committee to do all it can to ensure that the
Social Security Administration and the Veterans Administration make a
more robust effort to reach out to those among their constituents who
have yet to file in order to get their stimulus payments.
Thank you for the opportunity to provide our input. We look forward
to working with the Congress and the Executive Branch agencies to
ensure that all eligible individuals file for the economic stimulus
payment.
For more information, please contact Howard Bedlin, Vice-President
of Public Policy & Advocacy at [email protected].
Paul Donnelly, Statement
ReformtheRebate.com is a coalition organized to change the tax
rebate rules that discriminate against legal immigrants. We believe
that Congress over-reached when U.S. citizens and legal immigrants
whose spouses or children are not ``illegal'' but who do not have
Social Security Numbers due to SSA policies were barred from the
stimulus rebate if they file jointly, as married taxpayers are
authorized to do. We urge the Congress to extend to such civilian
families the same consideration that was recently applied to military
families, and for the same reasons: those who obey immigration law
should not be penalized in the name of fighting illegal immigration.
If this cannot be accomplished, the legal spouse should be able to
receive the rebate without losing the benefit of joint filing this year
and in the future as the price of getting a rebate.
We suggest the following questions:
1) The IRS has never been put into the position of enforcing
immigration law. To avoid requiring the IRS to determine that a spouse
is here legally without a Social Security Number, Congress has directed
that when someone in the military files a joint return with a valid
SSN, the couple is eligible for the stimulus rebate.
Isn't that the fair way to treat civilian couples, as well?
2) If the Congress directed the IRS to determine the immigration
status of a spouse who does not have a SSN when there is a joint return
where the other spouse has a valid SSN, would that impose a substantial
administrative burden on the IRS?
3) Whether or not someone is working here legally, the law
requires that they pay taxes on their income. Because many, if not most
illegal workers have taxes withheld by their employers, the IRS
acknowledges that illegal workers who file returns receive refunds
based on their withholding just like anyone else.
Does the IRS have an estimate for the total amount of taxes
that are refunded on returns with no SSN or an invalid SSNs each year?
4) Does the IRS accept tax returns without a SSN or ITIN? If so,
are refunds paid if due on such returns? What if more than one return
uses a single SSN? How are payments and refunds processed? Isn't it
true that sometimes taxpayers receive deficiency notices due to other
individuals' earning wages on their account which are reported on W-2s?
5) Does the IRS verify the validity of an SSN before processing a
return? Does the IRS identify duplicate filings on a single SSN? How
does the IRS sort out the situations of multiple W-2s on a single SSN
when some may reflect multiple jobs and others may reflect identity
theft?
6) There are many thousands of cases, beyond the military, where a
U.S. citizen or legal permanent resident is married and files jointly
with a spouse without an SSN. Does the IRS have an estimate for the
total amount of the stimulus rebates these families would be eligible
for if the Congress applied the same fair standard as to the military?
7) The IRS has a difficult job to do in the best of times. Were
Congress to clarify the intent of the stimulus package to be fair to
the U.S. citizens and legal permanent residents married to those who
lawfully file joint returns with only one SSN, would a credit on next
year's taxes equal to the amount of the stimulus rebate be the most
efficient use of IRS resources in correcting this unfair and unintended
slap at legal immigrants?
Santa Barbara Bank & Trust, Statement
Dear Mr. Chairmen and Ranking Members:
We are submitting this statement for the written record of the
joint hearing held by the Oversight and Social Security Subcommittees
on Thursday, June 19, 2008, to examine the status of the economic
stimulus payments (ESP) provided for in the ``Economic Stimulus Act of
2008'' signed into law by the President on February 13, 2008 (P.L. 110-
185).
Santa Barbara Bank & Trust (SBB&T), a brand of Pacific Capital
Bank, N.A., is one of the nation's largest providers of tax-refund
related bank products--refund anticipation loans (RALs) and non-loan
refund anticipation checks (RACs). We are particularly concerned about
comments made during the hearing which inferred that the RAL industry
was somehow responsible for the fact that ESPs were delayed up to eight
and a half weeks for taxpayers who elected this year to use RALs or
RACs in order to more quickly receive funds in anticipation of their
tax refunds.
In her written testimony, Nina Olson, the National Taxpayer
Advocate, highlighted as a major concern the fact that more than 20
million taxpayers who obtained RALs and RACs during the 2008 filing
season were ineligible to receive their stimulus payments quickly via
direct deposit and had to wait up to eight and a half weeks longer to
receive their checks by mail. Ms. Olson noted that the delays were not
caused by IRS error, but failed to provide any other contextual
background as to why the IRS decided to mail checks to these particular
taxpayers, rather than provide ESP quickly by direct deposit.
On February 15, 2008, the IRS issued a press release (IRS Press
Release 2008-21) announcing that ESPs would be made by paper check to
any taxpayer who received RALs or RACs in this year's filing season.
There were very good reasons for the IRS's decision to deliver ESPs to
these taxpayers by paper check. Taxpayers who utilize RALs to more
quickly obtain funds in anticipation of their tax refunds generally
receive payment (minus fees for tax preparation, filing, financing or
processing) within 24 hours after application. In the case of RACs,
taxpayers receive the net proceeds of their refunds (minus tax
preparation and account set-up fees) when the refunds are received from
the IRS (on average, 11 days after filing). The lending institution
that provides the RAL or RAC opens temporary bank accounts for its
customers into which the tax refunds are deposited. These temporary
accounts are closed after delivery of a RAC to the taxpayer or
satisfaction of the taxpayer's RAL.
More important, a large percentage of taxpayers who utilize RALs or
RACs to more quickly obtain funds in anticipation of their tax refunds
do not maintain regular bank accounts at a financial institution. As
the National Taxpayer Advocate's 2007 Objectives Report to the Congress
noted:
``It is estimated that approximately ten percent of American
households do not have an account at a financial institution. These
unbanked taxpayers have fewer refund delivery choices. They can request
that the IRS mail a paper refund check on either an e-filed or paper
return. However, these options generally entail high check cashing fees
and take up to six weeks to actually deliver the refund. For taxpayers
unwilling to wait four to six weeks for a check, the only real option
is to buy a bank product, which typically involves high fees.'' \1\
---------------------------------------------------------------------------
\1\ National Taxpayer Advocate, 2007 Objectives Report to Congress,
Volume II, p. 14 (July 2006).
---------------------------------------------------------------------------
More recent data indicates as many as 28 million Americans are
``unbanked.'' \2\ ``Forty-six percent (46%) of African Americans and
thirty-four percent (34%) of Hispanic Americans do not have an account
at a federally-insured financial institution.'' \3\ Those without
mainstream banking relationships cannot take advantage of IRS direct
deposit of their refunds. RALs and RTs bridge the potential eight-week
gap that many taxpayers who need quick access to funds would otherwise
have to wait to receive a paper check from the IRS. Thus, a very large
percentage of the taxpayers affected by the IRS's February 15th
guidance would have received their ESPs by paper check regardless of
whether they elected to obtain a RAL or RAC.
---------------------------------------------------------------------------
\2\ Remarks of FDIC Vice Chairman on June 21, 2007, to FDIC's
Alliance for Economic Inclusion.
\3\ Id.
---------------------------------------------------------------------------
Ms. Olson's testimony also failed to note that all taxpayers who
elected direct deposits of their income tax refunds into multiple bank
accounts (by filing IRS Form 8888), or who failed to elect direct
deposit of their refunds (approximately 30% of all filers \4\ were
required to receive ESPs by paper check, not simply those taxpayers who
chose to obtain RALs and RACs.
---------------------------------------------------------------------------
\4\ See http://www.irs.gov.pub/irs-soi/07ifss13.xls.
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Several Subcommittee Members were understandably concerned by Ms.
Olson's testimony pointing out the delays in delivering ESPs to
taxpayers who obtained RALs and RACs in this filing season. Rep. Earl
Pomeroy (D-ND) asserted that the RAL industry should have done more to
notify taxpayers before they elected RALs or RACs that doing so would
delay their ESPs. The fact is that responsible tax return preparers did
notify RAL and RAC customers as soon as they received notice of the IRS
guidance of the potential delays in receiving their ESPs. However, the
vast majority of taxpayers who utilize RALs and RACs generally do so
very early in the tax filing season. In SBB&T's case, 75 percent of our
RAL/RAC customers in the 2008 filing season had already made their
decision to obtain RALs/RACs before the IRS's press release was issued
on February 15th.
In order to prevent additional ESP delivery delays, RAL lenders
proactively worked with the IRS before the first ESPs were scheduled to
be direct deposited to prevent ESPs from being deposited to the
temporary accounts established to facilitate RALs and RACs. In fact,
SBB&T alerted the IRS to an error in a large tax practitioner's
software that would have caused over 500,000 ESPs to be erroneously
deposited had the error not been corrected. The bank also provided the
IRS with the solution to fix the error. According to IRS policy, in the
handful of cases where the IRS inadvertently deposited ESPs into a
temporary account, SBB&T immediately sent a check to the affected
taxpayer without charge.
It is somewhat ironic that critics of the RAL industry are
concerned about the impact on taxpayers of the delays in delivering
ESPs, yet seem to dismiss the very real value that RALs provide to
taxpayers by giving them quick access to much needed funds early in the
tax filing season. Particularly for many low-income taxpayers eligible
for the earned income tax credit, their annual tax refund represents
the largest sum of money they will receive at one time in the entire
year, and it comes at a critical time of the year after many families
become overextended during the holiday season.
In her 2007 Annual Report to Congress, the National Taxpayer
Advocate stressed the negative impact to low-income taxpayers of delays
in receiving their tax refunds:
Tax refunds are particularly important to low-income taxpayers--A
taxpayer for whom the refund is so significant often makes financial
plans based on when he or she anticipates receiving the refund and may
view the refund as a lifeline. For some taxpayers, a delay of two to
four weeks in receiving the refund could mean eviction, inability to
pay the high heating bills that arise during winter, or defaulting on
credit card bills from the holiday season.\5\
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\5\ National Taxpayer Advocate's 2007 Annual Report to Congress,
December 31, 2007, Volume I, p. 5.
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The Taxpayer Advocate was specifically addressing the delays in
this year's filing season resulting from the fact that Congress did not
pass legislation to address the so-called alternative minimum tax
``patch'' until December 2007. However, the same considerations apply
to RALs as well. If the ability to receive the proceeds of one's tax
refund two to eight weeks earlier than the IRS can deliver it means the
difference between paying for housing or being evicted, paying for heat
or enduring the cold, or paying off credit card debt or defaulting,
paying a reasonable fee to obtain a RAL is a sensible decision.
It is important to recognize that fees charged by SBB&T are indeed
reasonable. Critics often use Annual Percentage Rate (APR) measurements
of RAL costs to justify the argument that RALs are high cost loans that
take advantage of taxpayers. However, the use of APR calculations to
measure the cost of RALs is very misleading. Due to the short-term
nature of a RAL, APR calculations create an inflated representation of
their true cost. In its 2006 Report to Congress on the Debt Indicator,
the IRS contended that the APR is an inappropriate measure of the cost
of a RAL:
``Unlike loans of one year or longer, APR calculations for loans
not based on simple interest rates add multiples of costs that
borrowers will never pay. [When calculating APRs for RALs], finance
charges are assumed to be paid 36.5 times over the course of the year,
when in fact they are paid only once, no matter how long it takes to
pay back the loan--The reason this is important information is because
some critics of RALs cite the APR as the real interest rate that
taxpayers are charged.'' \6\
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\6\ IRS Report to Congress on the Debt Indicator, June 2006
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The average RAL funded by SBB&T during this filing season was
$3,200, for which the bank charged an account set-up fee of $31 and a
finance charge of 2.5% of the loan amount, or $80. This equates to a
total cost of about 3.5% of the total loan amount. These fees remains
fixed regardless of how long a RAL is outstanding. SBB&T does not
impose late charges or additional interest charges, even if a RAL is
never repaid. Nevertheless, we are required by federal banking laws to
calculate an APR on a RAL loan using an 11-day repayment period. Under
the example cited above, this transforms our fees of 3.5% of the loan
amount to an APR of 115%, even though the total cost to the taxpayer
remains at $111.
RALs (when not viewed in the context of an APR) cost less than
other common financial transactions that are entered into on a daily
basis. For example, Western Union charges consumers $145 to send $3,000
within the United States via wire transfer.\7\ Unlike RALs, a wire
transfer is a completely risk-free transaction. Fees for credit card
advances can range from three to four percent of the advanced amount,
plus interest charges--or $96 to $128, plus interest, on a $3,200
advance. Payday loans, without taking into account the even greater
interests costs when rolled over, range from $15-$20 per $100 borrowed.
By comparison, the average SBB&T RAL costs consumers $3.50 per $100
borrowed. When viewed in proper context of the relatively few choices
that many RAL borrowers actually have to obtain credit, the cost of a
RAL is comparatively inexpensive.
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\7\ See www.WesternUnion.com for Western Union's charge for its
``Money in Minutes'' wire transfer program to send $2,999 (their
maximum) anywhere in the United States.
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We appreciate having this opportunity to provide Members of the
Subcommittees with this additional background information explaining
the reasons for the delays in delivering ESPs to taxpayers who obtained
RALs and RACs, and request that you include our statement in the
written record for the hearing.
Sincerely,
Joe Sica
SVP--National Government Relations Director
Santa Barbara Bank & Trust
70 Oberlin Drive
San Diego, California 92121
The Honorable J. Russell George, Statement
Chairman Lewis, Chairman McNulty, Ranking Member Ramstad, Ranking
Member Johnson, and Members of the Subcommittees, thank you for the
opportunity to submit testimony for this hearing. My comments will
focus on the Treasury Inspector General for Tax Administration's
(TIGTA) audit and investigative actions pertaining to the Economic
Stimulus Act of 2008.
The Economic Stimulus Act of 2008, signed on February 13, 2008, was
enacted to energize the national economy. For most individuals, the
amount of the stimulus payment received is dependant on their net
income tax liability. Single taxpayers will generally receive the
greater of $300 or their actual tax liability up to $600 and couples
will generally receive the greater of $600 or their actual tax
liability up to $1,200. Anyone with qualifying children will also
receive an additional $300 per child. IRS began issuing stimulus
payments on May 2, 2008.
The stimulus payments are being estimated using information
reported on 2007 tax returns, so that individuals can benefit from the
payments as soon as possible. Individuals who qualify for a larger
payment as a result of changes between their 2007 and 2008 tax returns
will receive the additional payment when they file their 2008 return
(generally between January and April 2009). Individuals who receive
more than they would have if the payment had been calculated using
information from their 2008 return will not be asked to pay the excess
back.
Due to the time-sensitive nature of these payments, we have been
advising the IRS of our concerns as soon as we have identified them, to
allow the IRS to take immediate corrective action when possible. In
August 2008, we plan to issue the final report of this phase of our
work on the Internal Revenue Service's (IRS) efforts to implement the
stimulus payments.
Status of the Stimulus Payment Program:
The IRS issued approximately 76.5 million stimulus
payments as of June 13, 2008, totaling approximately $63.9 billion.
The IRS has made progress on resolving the back-log of
stimulus-only tax returns. The IRS had processed 94 percent of the 7.7
million stimulus-only returns received as of June 7, 2008.
The IRS plans to issue stimulus payments through December
2008 for those tax returns filed by October 15th.
Audit Status:
We have reviewed approximately 102.7 million \1\ stimulus payments
generated from returns processed as of May 30, 2008. We determined that
theIRS is correctly calculating the stimulus payment for approximately
99.6 percent of the returns. Correct calculation includes ensuring that
payments are not issued to individuals without a valid Social Security
Number, individuals who do not meet gross income and net tax liability
tests, and individuals who exceed income limitations. However, we have
identified approximately 385,000 stimulus payments in which our
calculation of the payment does not agree with the IRS's payment
calculation.Preliminary review of these payments found that the
differences resulted from:
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\1\ This figure differs from the number issued by the IRS because
our review includes payments that have not yet posted to taxpayer
accounts.
Programming that did not include qualified self-
employment losses in the determination of eligibility. The IRS, with
the Department of the Treasury's concurrence, is using a percentage of
the self-employment tax reported on Self-Employment Tax (Schedule SE)
in the computation of the stimulus payment instead of the actual self-
employment income or loss reported on various tax schedules. The IRS
and the Department of the Treasury indicated they were aware that this
methodology did not address Profit or Loss from Business (Schedule C)
and Profit or Loss from Farm (Schedule F) losses. However, the Treasury
Department chose to use the Schedule SE percentage because it would
have been too complex to program the payment for every possible self-
employment scenario, given the time available. The Treasury Department
indicated that the Schedule SE percentage would result in a correct
payment for most individuals. As of May 30, 2008, TIGTA had identified
approximately 104,000 returns with approximately $55 million in
stimulus payments that should not have been paid to individuals with
Schedule C and Schedule F losses.
Programming did not include all qualified self-employment
income in the determination of eligibility. As of May 30, 2008, TIGTA
had identified approximately 25,000 returns for which the stimulus
payment was not allowed. In these cases, we believe that taxpayers were
entitled to an additional $16.5 million. These errors affected clergy
and other individuals whose income is not subject to the self-
employment tax. TIGTA plans to review the IRS's programming of the
stimulus payments for Tax Year 2008 to ensure these individuals will
receive the payments they are entitled to when they file their 2008
return.
Taxpayers were not receiving the child portion of the
stimulus payment because they did not check the Child Tax Credit
qualifying box on the tax return.When TIGTA raised this concern, the
IRS initially responded that it could not allow the child portion of
the stimulus payment in these instances because eligibility for the
Child Tax Credit could not be determined from the information on the
tax return. The IRS subsequently announced that it will issue the
additional child portion of the stimulus payment to approximately
350,000 households in July. TIGTA is in the process of quantifying the
number of individuals that might be affected.
Other Items of Interest:
TIGTA has initiated a review to evaluate the
effectiveness of the Criminal Investigation (CI) Division's actions to
prevent the issuance of stimulus payments to individuals whose tax
returns claimed false income tax refunds or who filed false stimulus-
only returns. To date, we have obtained data extracts to be used in our
assessment of whether the CI Division implemented controls as indicated
and whether the controls are functioning as intended. We also plan to
select samples to determine if the appropriate freeze was placed on
accounts previously identified as fraudulent to ensure that a stimulus
payment is not issued and to ensure that controls designed to stop
stimulus payments for fraudulent returns are working as intended.
On May 22, 2008, Congress passed H.R. 6081, the ``Heroes
Earnings Assistance and Relief Tax Act of 2008,'' to amend the Economic
Stimulus Act of 2008 to allow thousands of military personnel to
receive a stimulus payment, regardless of whether they or their spouse,
or their children have a valid Social Security Number.The Joint
Committee on Taxation estimates that this provision will cost $14
million in Fiscal Year 2009. It is anticipated that the President will
sign this legislation. The IRS is currently working on identifying
affected military personnel. If this legislation is enacted, TIGTA will
review the IRS's implementation
Additionally, TIGTA is monitoring the following issues:
As of June 7, 2008, the IRS identified 246,079 duplicate
paper-filed stimulus-only returns. These stimulus-only returns were
filed using the same Social Security Number as another tax return. The
IRS has consolidated the processing of these returns at its Andover,
Mass., facility to expedite their processing and minimize the delay in
issuing the stimulus payment. The IRS has resolved 55,852 of these
returns. We are in the process of evaluating the procedures for
forwarding these returns to Andover, as well as the procedures that
will be used to resolve the duplicate filing conditions. Our review of
a random sample of50of these returns showed that 39 (78 percent) were
duplicate returns filed by the same taxpayer, which indicates these
cases did not involve identity theft. To date, 31 of 50 have had the
rebate issued. No rebate has been issued for the remaining 19.
The IRS has determined that between 18,000 and 22,000
Understanding Your Economic Stimulus Payment Notice (Notice 1378) were
issued to the wrong individuals. This was the result of a vendor error,
and the problem has been corrected.
The IRS identified a programming error that resulted in
approximately 1,500 payments being directly deposited into the wrong
individual's bank account. These payments totaled approximately $1.4
million. The IRS has since corrected the error and is in the process of
reissuing payments to the entitled individuals. IRS is working with the
banks to recover the incorrect deposits.
The IRS reiterated that it will issue a paper stimulus-
only check to anyone who 1) used a Refund Anticipation Loan (RAL), 2)
split the direct deposit refund among more than one bank account, or 3)
had tax preparation and other fees deducted from the refund (refund
anticipation check (RAC)). This process was established to ensure that
the individual received the stimulus payment instead of the financial
institution or tax preparer that provided the RAL or RAC. As of April
17, 2008, 9.9 million taxpayers had used a RAL and 10.3 million had
used a RAC to receive their refunds. For split refunds, the IRS decided
to issue a paper check because it did not know which account the
taxpayer wanted the stimulus payment deposited in. As of June 2,
approximately 225,867 taxpayers had split their direct deposit refund
among more than one bank account. Not all of these individuals may
qualify for an economic stimulus payment.
IRS officials stated that on May 28, 2008, they had been
notified by a tax preparation firm that approximately 450,000 tax
returns had been submitted to the IRS without the RAL indicator. The
IRS, aided by the firm, was able to identify these accounts before the
stimulus payments were issued. Payments for these accounts are being
correctly issued via paper check consistent with IRS's decision to
issue paper checks on accounts having a RAL. The media incorrectly
reported that these payments were being deposited into RAL accounts.
As of May 30, 2008, TIGTA identified approximately 8,800
individuals (0.15 percent) who filed a stimulus-only return had a
balance due on their tax accounts. Some of the balance-due conditions
are the result of IRS input errors or taxpayers entering information on
the wrong line of their tax return. The IRS is aware of this condition
and has taken steps to resolve these accounts.
Office of Investigations:
TIGTA has initiated 12 complaints involving economic stimulus
payments. The allegations are as follows:
One case involves an alleged return preparer scheme that
was reported to IRS-CID in Bogota, Colombia. CID referred the case to
TIGTA;
Two cases involve allegations of false impersonators
requesting bank information via the telephone;
Nine cases involve phishing emails, most of which direct
victims to follow an Internet link purportedly associated with the
recipient's economic stimulus refund.
In closing, I would like to emphasize that TIGTA will continue to
closely monitor the issuance of the economic stimulus payments and to
promptly alert the IRS of any problems or emerging issues. Mr. Chairman
and Members of both Subcommittees, thank you for the opportunity to
provide TIGTA's assessment of the IRS's implementation of the Economic
Stimulus Act of 2008. I would be pleased to respond in writing to any
questions you may have.